2023/01/16 (149.012) Technical Analysis

German Economy Expands 1.9% In 2022
May Be That`s Why European Shares At 9-Month Highs
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The strength in the stock market continued yesterday. There are obviously catch-up effects because the stock exchanges massively overestimated the (negative) effects of the Ukraine war on the European economy. Courses, which have therefore gone (much) too far in one direction, are now clearly going in the other direction. This applies in particular to the stock markets in Europe.

Markets Back To Their Pre-War Levels

As a result, the DAX has meanwhile climbed to the level at which it had topped before the Russian invasion of Ukraine on February 24, 2022 and the resulting bear market. Such counter-movements can not only be observed on the stock market. Energy prices have moved rapidly away from their highs. Although some of them are still higher than their long-term trends, they have nevertheless fallen back to the level that prevailed before the start of the war. As I expected, oil prices had already approached their long-term average rate again by the end of September and have now leveled off at this level. In other words: the Ukraine war is (almost) completely priced out of the courses, although it is still in full swing. The associated risks (e.g. an escalation that is still possible) are therefore ignored by investors.

The Ukraine War Is Fully Priced Out If The DAX! Is That Rightly so?

Only yesterday Russia did not rule out Belarus’ involvement in the war in Ukraine. Preparations for this have been in full swing for days, disguised as supposedly mere military exercises to deter potential opponents. Although the prerequisite is an attack by the Ukrainian army on Belarus, such an attack could also be assumed with the help of manipulations. As a reminder, Russia has already used Belarus as a springboard for the February 24 invasion. Nevertheless, in view of the price developments, there is again an almost unlimited buying mood – on all markets. And that’s exactly what I think is daring. A little more caution seems appropriate to me. The direction of the counter-movements on the stock exchanges is correct, but the pace is not (see also the day before yesterday Börse-Intern). Will the feared recession not materialize at all? The stock exchanges are also being fueled by the growing prospect that the feared recession will be mild or not occur at all. It was reported yesterday that the German gross domestic product (GDP) only stagnated in the fourth quarter of 2023 compared to the previous quarter, according to the findings of the Federal Statistical Office.

Good Data Ensure Optimism In The Dax – But The Risk Of A Crash Is Increasing

The leading German index has made a brilliant start to the year. An end to the rally does not currently appear in sight. But what if earnings season gets off to a disappointing start? It’s almost too good to be true: the leading German index, the Dax, has risen by more than eight percent this year to 15,087 points – a remarkable start to the year. So far, almost all experts who had predicted a difficult start to the year for the Dax were wrong. Instead, the reasons for falling prices have become fewer: export-oriented German companies are benefiting from the reopening of the Chinese economy, inflationary pressure is decreasing and the risk of recession has also fallen – on Friday the Federal Statistical Office announced that the German economy, contrary to expectations, in the fourth quarter of 2022 has not shrunk. These developments met extremely pessimistic investor sentiment. At first, a few buyers were enough to drive prices up. Then more and more former naysayers changed their minds, creating a steady stream of new buyers that drove prices higher and higher.

The DAX Explodes While The First Both Weeks Of This Year 2023

The German leading index DAX knew no stopping in the past two trading weeks. From the intermediate low at just under 13,7001 points, it went through the resistance band between 14,700 and 14,900 points in the high above the 15,300 point mark. Traders were buoyed by good consumer price data from the US. From a technical point of view, the DAX has been in a trend-leading upward trend on a weekly basis since this trading week. The red line of the GD 200 has long since been overcome and is now even turning slightly upwards. All in all, a good starting point for further growth. German consumer confidence and the ECB meeting could be disruptive in the coming week. Short-term traders should take a close look here, because there could well be opportunities for a correction again. From a technical point of view, the DAX now has room to rise to around the 15,700 point mark.German Economy Expands 1.9% In 2022
May Be That`s Why European Shares At 9-Month Highs

Germany’s economy grew by 1.9 percent in 2022, slightly above market expectations of 1.8 percent, but slowing from a 2.6 percent expansion in 2021. Europe’s largest economy was hit by a severe energy crisis due to the war in Ukraine, coupled with stubbornly high inflation, rising borrowing costs, supply constraints and a shortage of skilled workers. Nevertheless, private consumption was the main driver of growth (4.6 percent vs 0.4 percent), while there were smaller increases in both fixed investment (0.2 percent vs 1.2 percent) and public spending (1.1 percent vs 3.8 percent). At the same time, net external demand contributed negatively to the GDP as imports rose more than exports. By industry, the service activities drove the expansion, while the manufacturing sector stagnated and construction output contracted for a second year.

European shares were slightly up on Friday buoyed by upbeat global sentiment, with the pan-European STOXX 600 hitting a fresh nine-month high and Germany’s DAX 40 rising above 15,060 points, the highest level since mid-February. Investors welcomed data showing Britain’s economy unexpectedly grew in November, reducing the chance it slipped into a technical recession at the end of 2022; while the first decline in US consumer prices in more than 2-1/2 years could pave the way for the Federal Reserve to slow the pace of monetary tightening. On the corporate front, Vodafone Group, which is looking for a new CEO, plans to shed several hundred jobs, mostly in the UK, according to the Financial Times. Elsewhere, four American banking giants are forecast to report lower quarterly profits later today.