Weekly outlook: What is certain is that uncertainty has increased

12 Nov 2024

Weekly report courtesy of Eurex

A jubilant mood on Wall Street, sideways movement on Europe’s stock markets – after the turbulent previous week, events still need to be digested. Nervousness has increased.

11 November 2024 FRANKFURT (Frankfurt Stock Exchange). Customs worries about Trump, the traffic light system, uncertainty surrounding the new elections – the DAX seems to be facing more difficult times. “Uncertainty has increased. The future US trade policy in particular is fueling concerns,” explains Christian Apelt from Helaba. However, he also points to hopes for economic policy reforms in Germany.

On Monday morning, the DAX stands at 19,400 points. In the previous week, it had been able to hold above the 19,000 point mark and had ended trading on Friday at 19,215 points. The US stock markets reacted to Trump’s victory with new records. Bitcoin also climbed to an all-time high and is now trading at over USD 81,000.

Germany “politically paralyzed” for the time being

“The question on the financial markets is whether the Trump trade is now over for the time being and everyday life is returning or whether the political change is casting further shadows ahead,” notes Claudia Windt from Helaba. Perhaps there will only be a “calm between two storms” for the time being. Germany is likely to remain politically paralyzed in a difficult environment until new elections are held, also in view of possible burdens from the USA. The extent to which Trump’s re-election and the collapse of the coalition in Germany will ultimately affect the German economy is still unclear, however. “What is certain, however, is that uncertainty has increased noticeably.”

“DAX companies’ reporting disappointing”

The reporting season in Germany is in full swing, with Bayer, Allianz, RWE, Deutsche Telekom, Eon and Siemens, among others, publishing their accounts this week. According to Ulrich Kater from DekaBank, the DAX companies’ reports are disappointing. “Automotive stocks in particular are dragging down the index gains,” he explains. If you exclude the automotive sector, profits have risen slightly, but are lagging behind other regions. With the outcome of the US election and the break-up of the coalition, the structural challenges for German companies will remain high. “The faster and clearer the new governments communicate their plans, the better companies will be able to adapt to the changed framework conditions,” he emphasized. In the past, they have also successfully demonstrated their high level of flexibility time and time again. “This – in combination with an intact global economy, an inconspicuous valuation and low interest rates – speaks for moderate share price growth in the long term.”

“The stock market hates uncertainty”

Chart technician Christoph Geyer believes it is difficult to find technical signals in the current situation. “It would be unthinkable if the early general election turned into a hanging game. The stock market hates uncertainty,” he explains. In addition, the indicators are in neutral territory. Although turnover has recently increased, it is now declining again. It is now important that the support zone is held. “If constructive decisions are now made in the short term, the year-end rally could resume.”

Important economic and business events of the week

Monday, 11 November

USA: Veterans Day. Bond market closed.

Tuesday, 12 November

11.00 am. Germany: ZEW Economic Sentiment November. According to DekaBank, Trump’s election and the end of the traffic light government are not likely to inspire confidence, but this will probably not yet have left its mark on the ZEW survey. In view of better economic indicators, it expects a slight increase in the ZEW economic expectations.

Wednesday, 13 November

14.30. USA: Consumer prices October. According to Commerzbank, the figures will not bring any surprises. The overall rate is likely to have risen by 0.2 percent and the core rate by 0.3 percent compared to the previous month.

Thursday, 14 November

13:30. Eurozone: Summary of the ECB meeting on October 17. According to DekaBank, the meeting was dominated by a slowdown in inflation and weaker economic data. The summary will therefore probably contain an extensive discussion on whether inflation could fall below the target value of 2 percent on a sustained basis.

Friday, 15 November

3:00. China: Industrial production/retail sales October. Commerzbank forecasts only a slow stabilization for the Chinese economy. Industrial production probably grew by 5.6 percent year-on-year in October, retail sales by 2.9 percent.

14:30. USA: Retail sales October. According to Helaba, retail sales are expected to rise.

15.15 hrs. USA: Industrial production October. The index of hours worked provides a negative indication for industrial production, notes Helaba.

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