- DAX with largest daily loss since the beginning of May
- Commerzbank suffer hefty losses on coronavirus shock
- Powell dampens stock market sentiment
The German stock market came under heavy pressure in the middle of the week in the wake of Wall Street. Concerns that the coronavirus restrictions would be eased too quickly sent the DAX down. This was compounded by pessimistic statements by US Federal Reserve Chairman Jerome Powell regarding the recovery of the US economy.
DAX with largest daily loss since the beginning of May
The German standard index Dax closed 2.6 percent lower at 10,542 points. It was the biggest daily loss since the beginning of May. At the same time, the stock barometer closed below its short-term moving averages of the last 5 and 10 days (10,768.21 and 10,761.29).
The MDAX fell by 1.2% to 23,546 points and the TecDAX lost 0.5% to 2,987 points.
Commerzbank suffer hefty losses on coronavirus shock
The shares of the Deutsche Bank were under pressure. They lost more than 6 percent. This was caused by the poor quarterly figures of Commerzbank. The German bank posted a loss of 295 million euros due to the Corona crisis. In the same quarter last year, the bank had posted a profit of 122 million euros.
DZ Bank left Commerzbank’s rating on selling at a fair value of 2.70 euros, as dpa-AFX reported. As expected, the corona pandemic is burdening earnings, analyst Markus Mischker wrote in a study. In anticipation of a slower than originally hoped economic recovery in the second half of 2020, he revised his estimates for the bank downwards.
The Commerzbank share closed over 7% down at 2.98 euros, marking a new multiweek low.
Continental and Daimler shares were also weak, losing 7.28% and 6.42% respectively.
The health care share of Fresenius Medical Care remained relatively stable. It fell by only 0.34%. The pharmaceutical company Merck KGaA closed 0.53% down.
Fauci warns against a rapid resumption of normal life
The US immunologist and government advisor Anthony Fauci warned yesterday before the US Senate in the coronavirus crisis of a “too rapid return to normality, which could become large foci of infection”. This had already put Wall Street under heavy pressure the night before.
Also in Germany, RKI Vice President Lars Schaade issued a warning yesterday: The danger situation is not gone. “The virus is still there, even though it has become significantly less,” he added.
In Germany, there are 173,546 coronavirus cases and 7,770 deaths so far.
Investors fear that a rise in coronavirus cases could once again lead to nationwide lockdowns, which could have a negative impact on economic activity.
Tensions between US and China on the rise
The tensions between the US and China are far from over. Yesterday, Senator Lindsay and other Republican senators presented a bill “that would authorize the President to impose sanctions on the People’s Republic of China if China does not cooperate and fully explain the events leading to the COVID-19 outbreak”.
“We don’t expect that US-China tensions will escalate into a full-blown “financial war” Nonetheless, that possibility, and the likelihood that tensions will remain high ahead of the US elections in November, could continue to weigh on markets,” wrote Capital Economics in its Capital Daily.
Meanwhile, China criticised the bill presented by the US Senate. Washington apparently attributes all negative developments related to the coronavirus outbreak to the People’s Republic, said Chinese State Department spokesman Zhao Lijian.
Powell dampens sentiment on the stock market
Federal Reserve Chairman Jerome Powell, in an online webast with the Peterson Institute for International Economics on Wednesday, expressed concern about the current situation and the medium to long-term implications for the US economy.
He noted that “the scope and speed of the downturn are without modern precedent” and that a clear risk is that “the passage of time can turn liquidity problems into solvency problems”.
“As such he believes more action is likely required to support the US economy through the crisis. Unfortunately, as he himself acknowledges in the webcast “the Fed has lending powers, not spending powers” – its policy focus is more on ensuring lending and credit markets are functioning fully and that there is enough liquidity that financial system strains don’t start to feed back negatively on the economy”, said James Knightley of ING Bank in a note.
Like his colleagues, Powell played down the possibility that US interest rates could slip into negativ.
German DAX 30 key technical levels
From a technical point of view, the DAX perspective has clouded over again with the recent losses. Resistance is now at 10,768.21 (5-day moving average) and 10,761.29 (10-day moving average). Supports are at 10,277.75 (50-day moving average) and 10,000 (psychological mark).
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