German stocks are falling at a rate not seen since Europe’s sovereign debt crisis. The nation’s equity market has lost almost US$400 billion in value from a high in April as the DAX heads for its first back-to-back quarterly declines since the start of 2009.
Hit first by a rebounding euro and the Greek crisis, the losses accelerated in recent weeks as concern over a Chinese slowdown escalated and automakers tumbled after Volkswagen AG admitted cheating on emissions tests in some of its diesel cars.
“To some extent, investors have started to price in recessionary fears,” Ralf Zimmermann, a strategist at Bankhaus Lampe KG in Dusseldorf. “If markets don’t think central banks can react anymore, this would be very negative. However, I still think that markets will be mid-term up and not down as investors overreacted.”
The optimism that lifted the DAX 22 percent in the first quarter as the European Central Bank (ECB) began its quantitative-easing program has waned, with the gauge now down for the year.
While economists have cut their growth estimates for Germany this year to 1.6 percent from 1.8 percent last month, ECP President Mario Draghi last week said that it is too soon to say whether risks to the economic outlook warrant a step-up in stimulus.
German equities lost 23 percent since an April record through Monday, the fastest decline in a similar period since December 2011. Just this quarter, the DAX has tumbled 14 percent, more than any other major western-European market.
Germany’s link to China — it is the Asian nation’s biggest European trade partner — and VW’s downfall weighed on the market as utilities RWE AG and EON SE suffered from the lowest wholesale electricity prices in more than a decade and concerns their provisions for decommissioning nuclear plants may be insufficient.
Steelmaker ThyssenKrupp AG tumbled amid a rout in commodities, while Commerzbank AG was battered by share sales to repay state aid.
VW’s scandal will have repercussions for the DAX, Zimmermann said. The automaker accounts for almost 14 percent of the index’s estimated earnings for this year, Zimmermann wrote in a note on Tuesday last week.
The DAX has fallen so much that it now trades at 11.5 times estimated profit of its members, near the lowest valuation ever relative to the Stoxx Europe 600 Index, according to data going back to 2005.
To some investors, that represents an opportunity to buy German stocks.
“When the market is down with fears, we are on the buy side,” said Herbert Perus, head of equities at Raiffeisen Capital Management in Vienna. “We own some German companies and we’re very happy about our positions.”
DIVIDED VIEWS: Although the Fed agreed on holding rates steady, some officials see no rate cuts for this year, while 10 policymakers foresee two or more cuts There are a lot of unknowns about the outlook for the economy and interest rates, but US Federal Reserve Chair Jerome Powell signaled at least one thing seems certain: Higher prices are coming. Fed policymakers voted unanimously to hold interest rates steady at a range of 4.25 percent to 4.50 percent for a fourth straight meeting on Wednesday, as they await clarity on whether tariffs would leave a one-time or more lasting mark on inflation. Powell said it is still unclear how much of the bill would fall on the shoulders of consumers, but he expects to learn more about tariffs
NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures. The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs. Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent. “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,”
Greek tourism student Katerina quit within a month of starting work at a five-star hotel in Halkidiki, one of the country’s top destinations, because she said conditions were so dire. Beyond the bad pay, the 22-year-old said that her working and living conditions were “miserable and unacceptable.” Millions holiday in Greece every year, but its vital tourism industry is finding it harder and harder to recruit Greeks to look after them. “I was asked to work in any department of the hotel where there was a need, from service to cleaning,” said Katerina, a tourism and marketing student, who would
i Gasoline and diesel prices at fuel stations are this week to rise NT$0.1 per liter, as tensions in the Middle East pushed crude oil prices higher last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices last week rose for the third consecutive week due to an escalating conflict between Israel and Iran, as the market is concerned that the situation in the Middle East might affect crude oil supply, CPC and Formosa said in separate statements. Front-month Brent crude oil futures — the international oil benchmark — rose 3.75 percent to settle at US$77.01
RSS