Market report: DAX recovers

Shares of supposedly well-positioned banks were initially taken into custody today, but were also able to recover significantly in the course of trading with the market. Once again it became clear how quickly everything can happen when investors and customers lose confidence in their bank. High risk positions on the books, combined with the inevitable consequences of the strongest global interest rate cycle since the 1980s, have taken their toll on CS. Despite the CS drama, the confidence that 2008 will not be repeated ultimately prevailed today.

Analyst Clemens Bundschuh from the Landesbank Baden-Württemberg (LBBW) explained that the bank quake was not over yet, but that it remained manageable. The central banks are taking the banking crisis seriously, as the most recent measures to provide liquidity to the financial system show.

“Credit Suisse is our Lehman moment in Europe, but we recognize that and will not make the same mistakes,” said Robert Alster of wealth manager Close Brothers in London. The major central banks would therefore be able to identify the next banks to run into trouble and support them if necessary. “There is a lot of firepower on the part of the authorities to counter the steadily eroding loss of confidence.”

In the DAX, Commerzbank turned positive, while Deutsche Bank narrowed its losses significantly. UBS shares also turned positive in Zurich. Because the archrival of CS could possibly have made a good deal. Cushioned by lavish government guarantees, the bank, which also had to be rescued in 2008, can now significantly expand its market position.

Once again it became clear how quickly everything can happen when investors and customers lose confidence in their bank. High risk positions on the books, combined with the inevitable consequences of the strongest global interest rate cycle since the 1980s, have taken their toll on CS.

“Credit Suisse is our Lehman moment in Europe, but we recognize that and will not make the same mistakes,” said Robert Alster of wealth manager Close Brothers in London. The major central banks would therefore be able to identify the next banks to run into trouble and support them if necessary. “There is a lot of firepower on the part of the authorities to counter the steadily eroding loss of confidence.”

Interest rate cycle in focus

In such a situation, the central banks are more challenged than ever. The recent market turbulence has made the calls for an interest rate pause by the US Federal Reserve (Fed), which had been raised in the previous week, louder again. The Fed originally wanted to raise interest rates by 25 basis points the day after tomorrow. In the meantime, many market participants are no longer so sure.

The fact is, however, that inflation in the country is still far too high, so that a trend change by the Fed, despite the turbulence, is neither to be expected nor to be justified. However, the statements by the central bankers around their boss Jerome Powell will, as always, be of particular importance under the impression of the weakness of the banks. Most recently, he had clearly confirmed the Fed’s restrictive course.

“The market has digested the marriage between UBS and Credit Suisse. Systemic risk has eased somewhat and everyone is excited to see what the Fed will do,” said Matt Orton, chief market strategist at Raymond James Investment Management.

US Treasury prices are pointing to the Fed staying the course. The futures contract for ten-year bonds (T-Note future) falls back, while the yield on ten-year government bonds rises to 3.47 percent. German government bonds, recently sought as a safe haven, also gave way today, with yields rising to 2.11 percent.

Despite all the concerns of the banks, the shares of the armaments group and automotive supplier Rheinmetall made a remarkable debut in the DAX. The paper, which has been included in the leading index since today, ended up at the top of the index and gained more than five percent. In the DAX, Rheinmetall replaced the shares in the dialysis specialist FMC, which can now be found in the MDAX, the index of medium-sized companies.

Index changes are particularly important for funds that replicate indices in real terms (physically replicating ETFs). There must then be shifted and reweighted accordingly, which can have an impact on share prices. Positive impetus also came from new analyst studies with confirmed buy recommendations for Rheinmetall.

The increasing need for military equipment and further increases in defense spending in Germany and other NATO countries mean attractive medium-term potential for the company, explained analyst Holger Schmidt from DZ Bank.

In New York, at least the standard values ​​​​are recovering, the leading index Dow Jones gained around 1.1 percent and is again above the 32,000 point mark. The market-wide S&P 500 index gained around 0.8 percent. Things are quieter on the Nasdaq technology exchange, the indices are struggling with their closing prices. The emergency takeover of the major Swiss bank Credit Suisse by its competitor UBS is also supporting the ailing mood among investors in the USA.

The situation on the US stock market does not look so dramatic at the moment, the experts at Lynx wrote. In fact, not only gold and bonds, but also the Nasdaq 100 have made strong gains over the past week. And with the Nasdaq’s big tech stocks as heavily represented in the market-wide S&P 500 index as the Dow Jones’ “old economy” stocks, the relative strength of the Nasdaq also helped the S&P 500 post a weekly gain.

The fact that investors’ risk aversion is gradually waning can also be seen from the price of gold. While the yellow precious metal was still able to make significant gains in early trading and mark a fresh eleven-month high at $2009, it is trading slightly weaker at $1975 a troy ounce in the late afternoon. Even the safe haven dollar is no longer in such high demand. At the same time, the euro has risen to a daily high of $1.0724.

Meanwhile, the US bank First Republic, which is in crisis, does not come to rest. The bank’s share price continues to collapse in New York despite the promised injection of billions from eleven major banks. The shares of the Californian regional bank have lost around 80 percent of their value in eight trading days, and the price is currently falling by more than 13 percent.

Eleven major banks pledged $30 billion in aid to First Republic Bank on Thursday. Industry giants such as Bank of America, Citigroup, JPMorgan Chase and Wells Fargo joined forces for this joint approach. The rating agency Standard & Poor’s judged that this could “perhaps” not be sufficient. The First Republic was in trouble after the collapse of the Silicon Valley Bank (SVB). Established in 1985, the bank is ranked number 14 in the country by deposits.