Editor’s Note
This article highlights the resilience of German equity indices, particularly the DAX, which shrugged off early pressure from precious metals volatility to close higher on Monday. It serves as a timely reminder that localized market shocks do not always dictate broader index performance.
The temporary massive losses in the precious metals market did not sustainably burden the DAX DE0008469008 on Monday.
The German benchmark index fell by up to 0.6 percent in early trading before turning into positive territory. By midday, it was up 0.3 percent at 24,618 points.
The MDAX DE0008467416 of medium-sized stocks also recovered and was last up 0.2 percent at 31,219 points. In the segment of smaller stocks, the SDAX DE0009653386 reduced its losses to 0.7 percent. The Eurozone benchmark index EuroStoxx 50 EU0009658145, on the other hand, remained flat.
A key trigger for the recent slump in gold and silver prices was US President Donald Trump’s nomination of former Fed Governor Kevin Warsh as the successor to US Federal Reserve Chair Jerome Powell. This fueled market doubts that a significant monetary policy easing would actually occur.
Not a few speculators who had bet on credit for further rising precious metals prices were likely caught off guard by this. They then have to liquidate positions, which further weighs on prices – a downward spiral ensues until the situation is cleared. Such a development can then temporarily affect other markets, such as equities.
Jochen Stanzl, Chief Market Analyst at Consorsbank, wrote this. He added that recently too many investors had been invested in precious metals and were unprepared for the sharp correction on Friday. Now they have to sell other portfolio positions to cover the losses in metals.
In this environment, investors continued to take profits in defense stocks. This is not surprising, as these stocks had also performed above average strongly since the beginning of the new year. The sector continues to be supported by NATO requirements in light of Russia’s war of aggression against Ukraine, as well as geopolitical hotspots, after Iran’s supreme leader warned of regional escalation in the event of a US attack.
Thus, Rheinmetall DE0007030009 fell by 1.6 percent at the end of the DAX. In the MDAX, Hensoldt DE000HAG0005 lost 2.6 percent and TKMS DE000TKMS001 lost 2.4 percent.
Some stocks from the commodities sector that had risen sharply since the beginning of the year also had to give up gains. At the end of the MDAX, for example, Thyssenkrupp DE0007500001 fell by 2.8 percent.
Interest-rate-sensitive semiconductor stocks also did not fare well at the start of the week, especially since very well-performing papers from the sector had slumped at the South Korean stock exchange in Seoul. In the SDAX, Siltronic DE000WAF3001 was hit particularly hard with a minus of 4.7 percent.
Leading the MDAX were the shares of Nemetschek DE0006452907, which gained 3.3 percent. The US investment bank Bank of America had upgraded the papers twice and now recommends buying them. Analyst Victor Cheng argued that the construction software group “is building the future.” The expert currently sees an attractive entry opportunity due to prospects in the field of artificial intelligence.
— By Lutz Alexander, dpa-AFX —