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DAX in red: Investors are pulling back

Market report

Status: 04/20/2021 4:27 PM

Today, the DAX regains yesterday’s trend and backs down. Investors are taking profits after looking for the latest indices. There is also no support in sight from the United States.

In the stock market, investors are currently entering themselves. With the market only recently rallying (at the top of the DAX up to 15,501), investor appraisal is now giving way to a somewhat more sober outlook.

Neil Wilson, chief analyst at online broker, said the big question now is whether corporate earnings can meet expectations and justify current stock valuations. Thanks to the economy’s expected recovery from the consequences of Corona, pent-up consumer demand and billions in aid packages from central banks and states, the numbers should be strong. “But expectations are already high.”

Take profit

Against this background, many investors decided to realize accumulated profits first. The DAX is currently down about 1 percent.

What is the interest doing?

But corporate profits are only part of the situation, albeit an important one. It will be no less critical how interest rates develop and whether the increase in returns continues. Although Europe lags far behind the United States in this regard as well, recently bond prices have come under pressure in this country as well.

Thomas Altman of QC Partners commented: “Now the European Central Bank has to show that it opposes higher yields with increased purchases from the pandemic program.” “We are now reaching a point where increased revenues could pose a threat to economic recovery and a threat to national budgets.”

The European Central Bank will already be able to show on Thursday whether it wants to counter the increase. Because after that the regular meeting of the monetary policy board takes place.

Wall Street opened cautiously

There is no single trend on the world’s leading exchange in the first few minutes of trading, and volatility is low. The leading Dow Jones Index is down 0.25 percent, the Nasdaq technology exchange is struggling with closing prices, and the S&P 500 is losing about 0.1 percent.

Unlike this country, the reporting season for companies in the US is already in full swing. Record heavy weights from the leading Dow Jones, such as Coca-Cola yesterday and Johnson & Johnson today, also deliver their numbers, which are usually slightly better than expected. In the evening from 7:00 pm, new things are expected from Apple, the group introduces new iPads. After the market closed, I reported Netflix.

Stocks of tobacco are not required

According to a report in the Wall Street Journal, the US government is considering reducing the nicotine content in cigarettes and banning menthol cigarettes. This resulted in Imperial Brands, maker of “Gulu’s” company, and British-American “Lucky Strike” Tobacco (BAT) breaking price losses in London by as much as seven percent.

Also affected are your American rivals Philip Morris and Altria, who fell on Monday in response to the newspaper’s report. Analyst Owen Bennett of Jefferies Investment Bank commented on the price reaction. Such measures have been discussed for years. To date, however, there is no scientific evidence of its effectiveness.

Johnson & Johnson does a little more

US drugmaker Johnson & Johnson is setting the benchmark slightly higher for the full year after a massive first-quarter increase in sales and profits. For 2021, the Dow Jones Index heavyweight member now expects an increase in adjusted sales from 8.7 to 9.9 percent instead of from 8.0 to 9.5 percent, the company announced on Tuesday. For adjusted earnings per share, the company is now aiming for $ 9.42 to $ 9.57 instead of $ 9.40 to $ 9.60.

In the first quarter, J&J benefited from a continued recovery in the medical technology business and growth in the pharmaceutical business. Adjusted sales growth was 6 percent, and the company overall achieved good sales of $ 22.3 billion – more than analysts expected. Adjusted earnings per share increased by more than twelve percent.

J&J achieved $ 100 million in sales in the United States with its Corona vaccine in the first quarter. Vaccinations with the agent are currently pending. After rare cases of blood clots, it was stopped by US authorities last week. Then J&J delayed delivery of the drug in the European Union.

Procter & Gamble is better than expected

US consumer goods company Procter & Gamble performed better in the third quarter than analysts had expected. The group benefited from the sale of higher priced products, price increases and, to a lesser extent, the positive effects of currencies.

Sales in the three months to the end of March were reportedly up five percent to $ 18.1 billion. Adjusted for currency effects as well as acquisitions and sales, organic sales increased four percent. The bottom line is Procter & Gamble earned roughly $ 3.3 billion, up twelve percent over the previous year. After adjusting for one-time effects, earnings per share rose eight percent to $ 1.26. Analysts expected less.

The American group, known by brands like Ariel, Pampers, Oral-B or Braun and Gillette, confirmed the expectations. For example, sales are expected to grow naturally at five to six percent, and earnings per share adjusted by eight to ten percent.

The euro has ups and downs

On Tuesday, the euro initially picked up its big gains the day before. Sometimes the shared currency cost $ 1.2080 and thus was worth more than it has been since the beginning of March. By noon, the euro had largely given up its gains.

Dollar weakness is crucial to the euro exchange rate gains. Analysts at Commerzbank attribute the development primarily to lower interest rates in the US capital markets. Lower returns make investing in dollars seem less profitable and puts pressure on the exchange rate.

The single currency is also benefiting from the progress in mass vaccinations against Corona in this country and the US Federal Reserve’s commitment to a long-term and loose monetary policy, according to Commerzbank analyst Yu Na Park Heiger. In the event of renewed speculation about a US interest rate hike or setbacks in the war against epidemics in Europe, the tide could quickly turn again. No economic data has been released in the Eurozone. There is no expected data from the US either.

The Munich Re earns a lot more

Despite the heavy losses from the cold wave in the US, Munich Reinsurance made more than expected profits in the first quarter. According to preliminary figures, the group’s profits have reached about 600 million euros. A year ago, the result dropped to 221 million euros due to the extensive damage caused by the epidemic.

BMW improved significantly

Record first-quarter sales brought the BMW carmaker a staggering profit. According to preliminary figures, there was an increase of 3.76 billion euros before taxes – nearly five times what it was at the time of the outbreak a year ago. According to its own information, BMW has exceeded expectations in the stock market in terms of headline earnings figures.

Tratton became more optimistic

After a surprisingly good start to the year, the Traton-carrying VW commercial vehicle is somewhat more optimistic about the current year. The company said its adjusted operating return on sales should now be five to seven percent. So far, Tratton has assumed five to six percent. According to preliminary calculations, sales in the first quarter were 6.5 billion euros. Adjusted operating return on sales was 7.9 percent.

Jenoptik upgrade

Jenoptik Shares Are Driven By Promotion. HSBC is now advising to buy the paper for the technology group after the previous “Hold” vote. The risks on Jenoptik seemed manageable and opportunities were overlooked, according to analyst Richard Schramm.

K + S takes the next hurdle

The potash and salt group K + S is making good progress with the planned multi-billion sale of the salt business in the USA. The MDAX member said that after the US Department of Justice had given the green light to the takeover by the US holding company Stone Canyon Industries under certain circumstances, there were no more antitrust hurdles on the horizon. The sale will likely be completed for 2.5 billion euros in cash in about two weeks.

Zooplus share at a record level

The € 350 target price announced by US bank JPMorgan has pushed Zooplus’ shares to new heights. Analyst Borja Olcese wrote in his current study that the Corona pandemic is changing everything, especially as it accelerates the trend towards online trading. Its old target price was 225 euros.

The analyst praised ElringKlinger

According to the key data for the first quarter, investment bank Oddo BHF upgraded ElringKlinger from “Underperform” to “Neutral” and raised its target price from € 9.50 to € 12.00. Analyst Harald Eggeling wrote in a study that the auto supplier performed well and raised the annual operating margin target. He raised his earnings estimates for the years to 2023.

Schaeffler lowered the rank

Schaeffler’s shares were compensated. Investment firm Stifel downgraded the securities from “Buy” to “Hold.” Analyst Alexander Wahl wrote that after the strong first quarter, better business momentum in the short term and potential increase in expectations had already been priced in. Consequently, it will be difficult for auto suppliers and manufacturers to exceed the growing market expectations.

Deutz dares to do more

Engine manufacturer Deutz, listed on SDAX, is more optimistic about the year as a whole after a good 1% increase in sales in the first quarter. Deutz now expects sales to rise to 1.5 to 1.6 billion euros in 2021. Previously, the company had assumed 1.4 billion euros.

Walker Newson remains cautious

Construction machine manufacturer Wacker Neuson does not want to raise its forecast despite a significantly better first quarter than expected. The company said doubts about the effects of the pandemic on global supply chains and increasing customer demand had worsened dramatically. It also greatly increased the risk of insufficient material availability and delay in delivery due to the blockade of the Suez Canal. From January to March, sales were up six percent. The operating profit margin increased by three percentage points to ten percent.

Danone continued in the opposite direction

The effects of the epidemic and a strong euro took a toll on Danone’s business at the start of the year. The French food manufacturer’s sales are down more than 9 percent to just under 5.7 billion euros.