Successful start to the year: The German stock exchanges continued their record price from the end of 2020 in the last week of trading and again set new records. On the one hand, hopes drove towards the corona vaccination campaigns, especially since another vaccine was approved in the EU and approval of a third was promised. On the other hand, the expectation that the economy would continue to recover gave a boost, and some economic data were better than expected. And the outcome of the runoff elections in the US state of Georgia, after which the US Democrats now also have a majority in the US House of Representatives, created a good mood. This enables the designated US President Joe Biden to implement his plans more easily. In the meantime, concerns about the tightened and extended anti-corona measures and profit-taking led to price setbacks, but many investors used these as a buying opportunity the following day.
The German share index (Dax) jumped the 14,000 point mark and climbed 2.4 percent to 14,049.53 points compared to the last trading day of the previous week. The new record since last Friday is just under 14,132 points. The price of the HeidelbergCement index value rose significantly above average, namely by over 10 percent. The building materials group with strong US business benefited from speculation on infrastructure projects in the US. The MDax gained 1.8 percent compared to the previous week to 31,356.65 points. The K + S stocks stood out here with a price jump of more than 30 percent on a weekly basis. Several positive analyst assessments fueled the course of the salt and fertilizer producer. The TecDax rose by 2.5 percent to 3,293.58 points. The m: access All-Share jumped 4.6 percent to 3,004.40 meters, topping the 3,000 mark for the first time.
The German bond markets did not show a clear trend in the first week of trading in the new year. After the initial price increases, robust economic data and the increased risk appetite of investors weighed on. At the end of the trading week, the quotations of the federal securities then partially stabilized. Compared to the previous week, the yield on the trend-setting ten-year Bund rose from -0.58 to -0.52 percent. In contrast, the current yield last Friday was unchanged from the previous week at -0.56 percent.
The US stock exchanges continued to rise in the past week of trading, including new record highs. Hopes for further state aid against the consequences of the Corona crisis brought additional support. The Dow Jones index was 1.6 percent ahead of the previous week to 31,097.97 points. The broader S&P 500 index improved 1.8 percent to 3,824.68 points. The technology-heavy Nasdaq-100 gained 1.7 percent to 13,105.20 points.
The framework conditions for the German stock exchanges in the current week correspond in many respects to those of the previous week: The confidence in the face of the mass vaccinations against the coronavirus could continue to have a positive effect, as well as the expectations of the designated US President Joe Biden. In addition, the continuing hopes that the economy will pick up and help from central banks and politicians could provide further boost to the markets. And finally, there is still no serious, profitable investment alternative to stocks. On the other hand, there are the persistently high numbers of corona infections, the increasing number of pandemic deaths and the tightened anti-corona measures. In addition, in view of the strong price increases in recent times, a number of market observers are concerned about whether the valuations on the stock markets are now too high.
Which view will prevail in the short term will also depend on the upcoming economic data, although the top-class publications in the coming days will be manageable in number. Most interesting in this regard is Friday, when data on retail sales, consumer confidence and industrial production, among other things, will be released in the US. In addition, there are inflation figures, some of which will be published in the course of the week. Market participants consider the latter to be potentially important in the further course of the year, but at the moment inflation data are only likely to have a manageable impact on the markets.
As usual, news about Corona and the political situation in the USA could provide impetus. Company news could also play a role on the stock exchanges. In this country, for example, TeamViewer, one of the corona crisis winners, presented the first figures for the fourth quarter on Monday morning. And in the USA, the reporting season starts with figures from the major banks Citigroup, JP Morgan Chase and Wells Fargo, among others.
Selected important dates of the week
Monday. January 11th: Investor confidence in the Eurozone; Consumer prices in china
Wednesday, January 13th: Wholesale prices in Germany; Industrial production in the euro area; Consumer prices in the USA; Federal Reserve Beige Book
Thursday, January 14th: Germany’s gross domestic product; Speech by US Federal Reserve Chairman Jerome Powell; US import and export prices
Friday, January 15th: Eurozone trade balance; US Retail Sales; University of Michigan Consumer Confidence (USA); Producer prices in the USA; US industrial production; New York Empire State Production Index (USA)
Author: Dr. Robert Ertl, board member of Bayerische Börse AG
Live stream on December 14, 2020 from 6 p.m .:
With Hans-Werner Sinn, Former President of the Ifo Institute: Corona and the miraculous increase in money in Europe
– Here is the stream! –