Frankfurt's Stock Exchange: DAX on the Brink of Record, Yet Stuck in Neutral
The German DAX inched upward on Wednesday, yet it failed to gain significant momentum. The leading German index clambered up by 0.08% to 16,758.55 points, inching closer to its record high of the previous week.
Last week, the DAX had hit a high of 17,003 points, fueled by the rumors of the Federal Reserve's anticipated interest rate cuts in 2024. However, the European Central Bank (ECB) shyly held back, halting the exhilarating rally. It wasn't until Tuesday that the DAX once again gained ground after five consecutive days of moderate losses.
Some market enthusiasts remain hopeful for a minor end-of-year rally, but the air seems thinning. Martin Utschneider, a financial analyst from Finanzethos, suggests that the DAX has possibly reached its short-term upward limits for now.
DHL Group shares trailed behind in the DAX with a 1.7% plunge. Lower than expected performance figures from United States rival Fedex dragged down the sentiment in the sector. On the contrary, Deutsche Bank shares surged by 2.4%.
The MDax was similarly almost stagnant on Wednesday at 27,159.94 points, as was the Eurozone's head index, the EuroStoxx 50, last reported at 4536.81 points. A notable standout in the MDax was the shares of biofuel producer Cropenergies, which saw an increase of two-thirds to 11.42 euros. Südzucker plans to acquire complete control of its subsidiary and delist it from the stock exchange, announcing a takeover bid set at 11.50 euros per share in cash.
United Internet caught the eye with a 7.4% share price increase. The internet group anticipates an uptick in sales and profits for the upcoming year. Its subsidiary (1\&1) experienced a similar significant growth. The telecommunications provider projects growth in 2024, following an anticipated fall in profits in the current year.
Aurubis shares struggled following the presentation of business figures. The outlook for the new 2023/24 fiscal year was viewed as cautious. Uncertainty about the copper group's Executive Board could postpone a substantial share price recovery in the interim, as noted by Christian Obst, an analyst from Baader Bank. After several problems, the Supervisory Board aims to decide on the composition of the Executive Board at the start of the new year.
ProSiebenSat.1 gained attention. The media group's 2024 business outlook did not find favor, resulting in a nearly 6% drop in share prices. Analysts from Goldman Sachs questioned the forecast for the operating result, which was deemed lower than expected.
Relevant Insights
- The upcoming German federal election on February 23 is generating anticipation among investors, as they hope for a new government to enact reforms, such as modifying the "debt brake" constitutional law to allow for increased government spending on infrastructure, defense, and digitalization.
- Major German companies such as SAP, Siemens, Deutsche Telekom, and Mercedes-Benz generate the majority of their revenue abroad, thus allowing the DAX index to perform well despite domestic economic challenges.
- The DAX has a higher P/E ratio of 17.08x when compared to the MDAX's P/E ratio of 15.34x, contributing to the DAX's outperformance.
- The recent recovery in analyst confidence as demonstrated by the sharp recovery in ZEW analyst confidence, as well as the potential for a Ukraine ceasefire reducing geopolitical risk, play a role in the positive sentiment in the stock market.
Sources:
*Translated from German to English by Mistral Translations*
