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DAX Plunges To New Lows Amid Rising Bond Yields

By Jürgen MolnarMarket OverviewSep 23, 2022 08:25AM ET
www.investing.com/analysis/dax-plunges-to-new-lows-amid-rising-bond-yields-200630235
DAX Plunges To New Lows Amid Rising Bond Yields
By Jürgen Molnar   |  Sep 23, 2022 08:25AM ET
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The DAX plunged again, ending the week in negative waters. Tentative attempts by bulls to push the market back towards 13,000 were quickly undone with a new wave of selling on Wall Street. After falling below the low for the year, the market now faces another dismal trading week.

There is simply a lack of buyers in the market to make medium- to long-term commitments; trading is currently dominated only by short-term players. After breaking 13,000, the index is headed toward the 12,000 mark.

Rising Interest Rates Hurt Equities

Above all, the rapidly worsening monetary policy conditions are hurting equities. The US Federal Reserve raised key interest rates for the fifth time this year to 3.0% to 3.25%. With the prospect of at least two more hefty rate hikes by the end of the year to a then Fed-projected 4.5%, the yield on the 10-year US Treasury bond rose to just under 3.7%, its highest level in more than 11 years.

"I wish there were a painless way to do that,"

Fed Chairman Jerome Powell said, referring to the negative impact of his monetary policy decisions on the economy. "There isn't," he added. Faced with an interest rate turnaround at an unprecedented pace, investors are staying out of the stock market. And those who are in, while still calm, are becoming increasingly nervous.

Uncertainty is also rising because of the escalation of another flashpoint, the war in Ukraine. With the partial mobilization of the armed forces by the Russian president, the conflict is shifting up a gear. Not only do the risks in the war itself increase, but the move also shows that the initiator of the war has his back to the wall and thus becomes even more unpredictable.

In addition, mock referendums under Moscow's control will take place in the occupied territories over the weekend.

German Inflation Heading For The Ten Percent Mark?

The coming week is relatively quiet except for the release of the September inflation rate for Germany on Thursday. After the expiry of the nine-euro ticket, the petrol rebate, and the increasing mail from gas and electricity, the rate of 7.9% last time is likely to climb quickly towards double-digit figures forecast by many economists for the end of the year.

The European Central Bank has to follow the Fed's lead in raising interest rates to stabilize the euro. But, the central bank faces a big dilemma because of scarce and expensive energy in the continent.

How does it intend to fight the inflation fuelled by this without causing the economy to crash? We should have an answer at the next meeting.

Porsche IPO - A Mood-Setter?

In the midst of these less than ideal conditions, the sports car manufacturer Porsche ventures to go public on the Frankfurt Stock Exchange on Thursday. Just a few hours after the start of the subscription period, the shares were oversubscribed many times over, with an offered price range of 76.50 to 82.50 euros.

Because of the brand's recognition and the general affinity of German investors for carmakers, the IPO has a good chance of success. However, since the valuation can easily keep up with the company's sporty models compared to other carmakers and strong demand for the shares can drive up the value, interested investors should be wary of buying right now.

But perhaps a successful Porsche IPO can turn the mood on the overall market at the end of the week.

DAX - Current Supports And Resistances

  • Supports: 12,400/12,370 + 12,200/12,050 + 11,500
  • Resistances: 12,550/12,600 + 12,750/12,800 + 12,950/13,550

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DAX Plunges To New Lows Amid Rising Bond Yields
 

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DAX Plunges To New Lows Amid Rising Bond Yields

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