Frankfurt Sometimes it is enough to hear only less bad news to get a good mood. A postponed Brexit and yet again vague hopes for an agreement in the trade dispute have put investors on the stock market in a buying mood.
The current figures on the economy, however, speak a different language: Although last Friday were still positive numbers announced on the US labor market, but the current quarterly reports are less impressive. In the third quarter, the businesses of the companies fell rather mau, uncertainties slowed down the investments.
The international financial markets defied this, however. Last Friday, strong labor market data and hopes for a partial agreement on the US-China trade dispute drove US exchanges to record highs. For the first time since mid-September, the Dow Jones Index of Defaults overcame 27,300 points.
As a result, the Wall Street Index is not far from its record high of just under 27,400 points in July. The market-wide S & P 500 and the Nasdaq selection index 100 also reached record highs.
The US economy created significantly more jobs in October than expected. "The stagnation of the unemployment rate near its 50-year low is a strong indication of the robustness of the US economy," which has "staggered the trade conflict with China so far," analyst Thomas Altman of QC Partners said. Strong economic data from China also brightened the mood at the end of the week. China's industry grew in October as much as it did two years ago.
Outside the US market, investors could look forward to price gains at the end of the trading week. The German Lead index Dax came up to eight points on Friday at the 13,000 mark and went with a gain of 0.7 percent at 12,961 points from the trade. The euro zone leading index EuroStoxx50 gained 0.5 percent to 3,623 points.
Bank strategists, however, doubt that the price gains continue on the stock exchanges. "The continuation of the golden stock market fall is anything but guaranteed," says Robert Greil, chief strategist of the bank Merck Finck. He points out that "the markets are pricing in much hope for a possible trade deal USA-China and a Brexit solution."
None of this, however, is in a dry towel. "Whether, as intended, a convincing deal between Trump and Xi in mid-November is absolutely unsafe," says Greil. Investors took a positive stance toward the end of the week that US Treasury Supreme Economic Advisor Donald Trump – Larry Kudlow – said optimistically: The chances of finding a trade deal with China are good. Trump and his negotiating delegate are "very optimistic," he said in an interview.
Michael Bissinger, an analyst at DZ Bank, also believes that the potential on the stock market is largely exhausted. "The current earnings season shows that companies are experiencing significant headwinds from ongoing political struggles," he notes.
Growth in the euro area is likely to be significantly weaker than in the US. Between July and September, it was only just above the zero line, the analyst estimates. "Growth expectations are therefore weaker than they have been for many years," summed up Bissinger.
Expectations are being traded on the stock exchanges – and these have been rated less negatively in recent weeks, especially with regard to Brexit and the trade dispute, he says. The hope that the crises will not escalate and that economic expectations will not become more negative is obviously driving the market.
German balance season reaches its peak
This is also indicated by Friday's ISM manufacturing index, which, at 48.3 points in October, was slightly above September, but slightly below economists' expectations. Although it is still too early to bet on an economic recovery in the industrial sector, says Ralf Umlauf, economist at Helaba. But stabilization suggests that recession concerns and interest rate cuts do not increase.
However, analysts no longer consider equities to be cheap. "The courses have already anticipated some of the turnaround for the better," explains Bissinger from DZ Bank. At the same time, the leading central banks continue to support the markets with a very expansive monetary policy – but even more is not expected from them. In this mixed situation, the analyst reckons with initially sideways fluctuating rates.
In the new week, the German balance-sheet season reaches its peak: One-third of all DAX companies submit business figures. These include the carmaker BMW, the technology company Siemens and the insurer alliance,
Among other things open the Italian sports car blacksmiths abroad Ferrari and the US entertainment group Walt Disney their books. That the German companies had so far exceeded the analysts forecasts majority, in view of the low expectations is no surprise, said Dirk Steffen, chief investment strategist German bank, Compared to the previous year, companies have even increased their profits.
On the other hand, there are few economic data on the schedule. Among other things, numbers on orders for the US industry will be presented on Monday. German industry will follow on Tuesday. The latter is likely to confirm the poor state of the domestic manufacturing industry, says CommerzbankEconomist Ralph Solveen. In addition, the sentiment barometer of German purchasing managers and European retail sales will be released on Wednesday.
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With material from Reuters