Dhe recovery rally on the German stock market should take a break on Thursday for the time being. Investors will probably hold back before the European Central Bank’s (ECB) interest rate decision. Investors preferred to hold back before the European Central Bank’s (ECB) interest rate decision.
The leading German index Dax fell in the first few minutes of trading by 0.64 percent to 12,407 points.
In the morning, for investors, the first thing is to evaluate the economic stimulus package agreed on by the coalition leaders after a tough struggle in Germany. It is expected to have a volume of 130 billion euros for 2020 and 2021. The grand coalition has decided against the purchase premium for diesel and gasoline demanded by the industry. Instead, there should be more subsidies for electric cars. This is a negative surprise, even if a strong opposition to it was clear, commented auto analyst Jose Asumendi from JP Morgan. In the recently strong automotive industry, disappointment spreads on Thursday. The shares of the car manufacturers Daimler, BMW and Volkswagen fell by up to 6.7 percent, and the papers of suppliers like Hella or Continental were among the losers.
The previous day, the brilliant catch-up in the Dax had continued, almost 8 percent on the first two trading days of the month. The rally later continued on Wall Street. Better than feared economic data from the American labor market and robust economic signals from China, investors had continued to fuel their bet on a rapid recovery in the global economy.
However, market participants had already warned of at least short-term overheating the day before. Strategist Jeffrey Halley from broker Oanda spoke of an “buy everything rally” that continued unabated on the New York Stock Exchange. The driving force was the surprisingly stable data from private employment service provider ADP, despite the Corona crisis.
In Asia, however, signs of fatigue appeared in the morning. Many experts believe that the European Central Bank may decide to increase its new crisis bond buying program (PEPP) in the early afternoon. It is speculated on an expansion by 500 billion to then 1.25 billion euros and an extension of the term until the coming year.
Bayer stocks went down in the face of a stock market pending the ruling by an American court that overturned a restricted approval of the group’s weed killer Dicamba. A trader said the case could hardly be compared to the disastrous billion dollar dispute over the weed killer glyphosate, but this should weigh on the mood for the stock. The decision means that farmers can no longer use Dicamba. The chemical company BASF, which also sells Dicamba products, is also affected by the judgment.
There was also news from Encavis, the wind and solar park operator, who has signed a cooperation agreement with partner Sunovis to set up a solar portfolio of at least 200 megawatts.
The post-exchange review of the Dax indices by Deutsche Börse is also eagerly awaited. The drop in the course at Lufthansa in the wake of the Corona crisis is likely to result in the descent from the Dax. After almost 32 years of membership in the leading German index, the airline will very likely have to vacate its place for the real estate group Deutsche Wohnen.
In addition, further changes in the back rows of the stock exchanges are expected. Index changes are particularly important for funds that exactly replicate indices. There must then be rebalanced accordingly, which can have an impact on share prices.