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Market report: US debt dispute continues to have a firm grip on the markets


Although a compromise has been found in the US debt dispute, investors remain nervous. While the US stock exchanges have not found a common direction, the DAX failed at the 16,000 point mark.

The US stock markets have been inconsistent after the long weekend. While uncertainty about the US debt dispute remains high in the markets, tech stocks continue to soar.

The tech-heavy Nasdaq 100 started the afternoon session 1.27 percent higher at 14,479 points, continuing Friday’s rally when it was already up 2.6 percent. In the end, the gains crumbled somewhat, but the index still closed with a small plus of 0.4 percent.

The driver of the high is still the chip manufacturer Nvidia, which, thanks to the wave surrounding artificial intelligence (AI), marked a record high for the third day in a row and has now even cracked the one trillion US dollar mark in terms of market value. The company announced today that it would build one of the world’s fastest supercomputers in Israel.

In contrast, the default values ​​on Wall Street in particular suffered from the continuing uncertainty surrounding the debt dispute in the USA. Investors are waiting to see whether the US Congress will approve the compromise reached over the weekend tomorrow. His decision is not yet certain. Until a final agreement is reached, market volatility will probably continue to increase, wrote analyst Pierre Veyret from broker ActivTrades. There remains a certain residual risk, “because nothing is done until it’s done,” said analyst Konstantin Oldenburger from the trading house CMC Markets.

The leading index Dow Jones fell by 0.15 percent to 33,043 Points and thus continued his loss from last week. The market-wide S&P 500 was stable. Meanwhile, surprisingly positive data came from the sluggish real estate market, as house prices rose more sharply than expected in March. In addition, consumer sentiment determined by the Conference Board did not deteriorate as much as expected in May.

Concerns about the debate about raising the US debt limit continue to weigh on the Frankfurt stock market. Once again, the DAX ran out of breath above the 16,000 point threshold. After the leading German index was well above the round mark during the course of the day, it finally closed with a discount of 0.27 percent at 15,908.91 points. At times, the DAX was still around 16,061 points.

Yesterday it was down 0.2 percent at 15,953 points. The experts at HSBC, who argue technically, are nevertheless optimistic: it was just over a week ago when the DAX recorded a new record high of 16,332 points, the experts wrote in their daily market commentary. Strength leads to further strength, is an elementary principle of technical analysis, according to her assessment.

In Germany, after slipping into a recession in the first quarter, banking economists are now expecting the German economy to shrink in 2023 as a whole. The economists at Deutsche Bank predict a decline in gross domestic product (GDP) of 0.3 percent after previously expecting stagnation. The Berenberg Bank even dropped its forecast from 0.0 to minus 0.4 percent. The analysts at the KfW development bank and Commerzbank also expect a slight contraction for 2023. This means that the banking economists are significantly more pessimistic than the federal government, which raised its forecast to plus 0.4 percent in the spring.

The main reason for the pessimism is the reluctance of consumers to buy, who suffered another loss of purchasing power in the first quarter due to persistently high inflation. The gross monthly earnings of employees including special payments grew by 5.6 percent compared to the same quarter of the previous year, more than at any time since these statistics began in 2008. However, consumer prices rose much more strongly in the same period at 8.3 percent, according to the Federal Statistical Office. From this, its experts calculated a real drop in earnings of around 2.3 percent.

Wages in Germany have risen sharply due to the latest wage increases.

Meanwhile, the mood in the economy of the eurozone deteriorated more than expected in May. The business climate barometer fell 2.5 points to 96.5 points, according to data from the European Commission. Industrial confidence slipped for the fourth straight month. The mood among service providers and retailers also went downhill. At the same time, the money and credit data from the ECB also point to sluggish economic development. Bank lending is still extremely weak, commented the analysis house Capital Economics.

The gloomy picture fits the meager economic situation. The economy in the euro zone started the year with little momentum. From January to March, gross domestic product (GDP) increased by only 0.1 percent compared to the previous quarter. At the end of 2022, the economy was still stagnating. In its spring forecast for the euro zone, the EU Commission expects GDP to increase by 1.1 percent this year.

However, the weak economic data from the currency area did not have a lasting impact on the euro. After being under pressure until mid-morning, temporarily falling to its lowest level since March at $1.0673, it then recovered to last trade at $1.0722.

The Turkish lira continued to plummet. It hit a record low against the euro and fell towards its all-time low against the US dollar. On the market, the price losses were explained by President Recep Tayyip Erdogan’s election victory over the weekend. According to Commerzbank’s foreign exchange expert Ulrich Leuchtmann, further losses in the lira cannot be ruled out after the election decision.

Oil prices extended their losses today. A barrel (159 liters) of North Sea Brent for delivery in July last cost $73.84. That was $3.23 less than the day before. The price of a barrel of American West Texas Intermediate (WTI) grade fell by $3.03 to $69.60. According to market observers, the price of crude oil was weighed down by concerns about further economic development in China. Recently, economic data from the second largest economy in the world had been disappointing on several occasions.

According to traders, it is also evident that Russia has not substantially reduced its oil production, despite announcements to the contrary. Rather, the country is trying to further increase its diesel exports. Some refineries have returned to full capacity after maintenance work. In addition, all eyes are on the US debt dispute and the meeting of the Opec+ oil association next weekend.

Thanks to the growing demand for chips due to the boom in artificial intelligence, Nvidia’s market value has broken the sound barrier of one trillion dollars today. The company was the first chip manufacturer ever to be admitted to this exclusive club, which currently has a total of six companies. Nvidia shares rose nearly 7 percent to a record high of $415.50 as Wall Street opened. As a result, the market capitalization grew to almost $1.026 trillion.

The commercial vehicle manufacturer Daimler Truck wants to merge large parts of its Asian business with its competitor Toyota. The Daimler truck subsidiary Mitsubishi Fuso Truck and Bus is to merge with the Toyota subsidiary Hino in a holding company, as the Swabians announced yesterday. Both companies are said to be equally involved. However, the company is to be listed on the Tokyo stock exchange, so a significant proportion is also to go to external investors. The letter of intent between the two groups is not binding. Daimler Truck did not give any financial details.

The Italian record champions Juventus Turin avoided another point deduction in Serie A. The sports court of the football association FIGC sentenced the Turin team to a fine of around 718,000 euros for illegalities and financial tricks in the payment of player salaries. This was revealed today after the club’s lawyers and prosecutors from the FIGC agreed on a deal. In addition to the fine, this stipulates that the former series champion accepts the judgment in a different procedure and thus a sensitive deduction of ten points.

The Indian Ministry of Defense is increasingly relying on the fuel cell supplier SFC Energy to supply its units with energy. Together with an Indian partner company, SFC has now received a large order for 900 stationary methanol fuel cell generators, the company announced. The energy sources are produced in India. The initial order volume amounts to more than 17.5 million euros and includes the delivery of the systems over a period of one year and a five-year service contract, it said.

How much money the board members of DAX companies earn depends more and more on sustainability issues. This year, for the first time, executive board remuneration in all 40 companies in the stock index without exception is linked to so-called ESG criteria, explained the personnel consultancy Russel Reynolds Associates. This refers to the environment, social issues and correct corporate governance. On average, 8 percent of executive board remuneration depends directly on the achievement of these goals.

Commercial property specialist Aroundtown felt the effects of falling property values ​​and property sales in the first quarter. Operating profit, measured by the Funds from Operations (FFO 1) indicator, which is important in the industry, fell by 5.3 percent year-on-year to EUR 84.6 million. The bottom line is that the company reported a loss of 21.6 million euros due to the lower valuation of its real estate. In the same period of the previous year, there was still a profit of 124.5 million euros on the balance sheet.

The international tour operator TUI is significantly expanding its holiday offers for Turkey in 2023. The group announced today that the capacity is around 40 percent higher than in the pre-corona year 2019. TUI expects to bring 2.2 million guests from European countries to the holiday regions of Antalya, Dalaman, Izmir and Bodrum this year. More than a million of them come from German-speaking countries. About 15 percent of all German TUI travelers booked a trip to Turkey, said Stefan Baumert, CEO of TUI Germany.

According to its own statements, Airbus competitor Boeing is making progress in ramping up production for its 787 Dreamliner wide-body aircraft. In the meantime, four of the machines are being built per month instead of the previous three, Boeing manager Lane Ballard told reporters today during a tour of the plant in Charleston, South Carolina. In April, Boeing announced that production was now stable at three Dreamliners a month. By the end of the year, five jets will leave the factory buildings every month.

According to a media report, the US investment bank Goldman Sachs is preparing another round of layoffs. The layoffs are said to affect fewer than 250 jobs, the Wall Street Journal reported today, citing people familiar with the matter. That is less than one percent of the bank’s workforce of 45,400 at the end of March. Goldman was initially unavailable for comment. It would be Goldman’s third round of layoffs in less than a year. Almost every department at Goldman has had to cut spending this year.