Initial gains in the course of robust labor market data fizzled out when Gazprom announced that, contrary to what had been announced, no gas will flow through the Nord Stream 1 Baltic Sea pipeline from this Saturday. The reason is an oil leak in the Portovaya compressor station. Gas flow remains stopped until cleared. The news brought Europe one step closer to blackouts, gas rationing and a deep recession. A significant economic downturn in the region would also hit the important trading partner USA hard. The courses gave way accordingly.
Dow Jones Industrial gave up interim gains of more than 1 percent and ended down 1.1 percent to 31,318 points. In the course of the week, the best-known Wall Street index recorded a loss of three percent. The market-wide S&P 500 also fell by 1.1 percent to 3,924 points. The tech-heavy Nasdaq 100 fell 1.4 percent to 12,098 points.
Job data provided some relief in early trading. Unemployment rose surprisingly in August, albeit from a low level. Wage growth has slowed somewhat, but remains strong on a longer-term basis. In addition, the rate of employment growth slowed compared to July, when an exceptionally large number of new jobs were created. Overall, according to observers, the pressure on the US central bank to raise interest rates sharply in the fight once morest inflation has at least not increased any further.
In the once more significantly clouded environment, only three stocks in the Dow were able to assert themselves in the profit zone. At the end of the index, shares in the 3M conglomerate lost 3.2 percent. At the top of the Nasdaq 100, Lululemon soared 6.7 percent following the Canadian sportswear maker released its quarterly earnings report and raised full-year targets. Demand from high-income consumers has remained high, a trader said. Credit Suisse analyst Michael Binetti wrote: “The bottom line is that the company has demonstrated outstanding strength in a significantly weakening retail environment.”
The euro also suffered from the Russian gas ban and was last listed at 0.9954 US dollars. The dollar thus cost 1.0007 (0.9996) euros. On the other hand, US government bonds, which are considered safe, benefited from the price losses on the stock market.
After a previously disappointing week, the Dax had previously increased by 3.3 percent to 13,050 points, thus ironing out the losses of the past few days. The MDax recovered by 3.1 percent to 25,162 points. “Overall, the labor market report paints the picture of a slight loss of pace in employment,” wrote economist Christoph Balz from Commerzbank. The strong increase in jobs in July of more than 500,000 turned out to be an “outlier”. In addition, the figures for July and June were subsequently revised significantly downwards. Nevertheless, the Fed will stick to its restrictive monetary policy.
On the company side, a takeover bid for SLM Solutions provided a topic of conversation: the paper jumped by more than 70 percent to 19.66 euros. They came close to the €20 cash offer from the Japanese Nikon Group, which wants to create a world leader in 3D metal printing.
Important pillars for the Dax were the stocks from cyclical sectors, which have recently fallen quite sharply, including above all the solid automotive sector with price gains of 6.7 percent for Volkswagen and 4.9 percent for VW-Holding Porsche SE. With the two stocks, news regarding the planned IPO of the sports car subsidiary Porsche AG is expected soon.
Utilities also recovered, partly because of the ongoing discussion regarding longer operating times for nuclear power plants. Two miles might, according to the Handelsblatt stay online. The Eon titles increased 3.8 percent. Henkel shares lagged the market on a downgrade. After a sell recommendation from Goldman Sachs, they were the only DAX loser with a discount of 0.6 percent.
In the medium term, however, the development of the inflation rate and the associated interest rates will be of concern to the markets. The signs continue to point to higher interest rates. Central bank representatives made this very clear at this year’s conference in Jackson Hole, USA, and thus frightened financial market participants. “In July, many investors assumed that the US Federal Reserve would raise interest rates less than expected,” comments Karsten Junius, chief economist at Bank J. Safra Sarasin. As a result, stock markets rose and interest rates fell. At the monetary policy meeting in Jackson Hole, however, the central banks made it unmistakably clear “that the inflation problem has not been solved”. Although inflation in the US fell slightly in July compared to June, it remained at 8.5 percent.
It also reaches very high values in Europe. In the euro zone it rose to 9.1 percent in August, and in some countries it is already in the double digits. “In view of these values, it is urgently necessary for the central banks to counter this with interest rate hikes,” analyzes Junius. “The financial market participants have to get used to the fact that we are in a new regime.” When inflation was below two percent, the central banks believed it was possible to suspend interest rate hikes. In view of the level of current inflation, however, they are now obliged to raise interest rates.
With this in mind, dividend stocks are a way to generate income while hedging the portfolio somewhat to the downside. Because companies that pay high dividends often also have a solid balance sheet with comparatively high equity ratios, low debt and a good cash position. The stability of dividend stocks is illustrated by the “iShares Stoxx Global Select Dividend 100 Index” (ISIN: DE000A0F5UH1), which pays dividends up to four times a year and has lost only 3.4 percent since the beginning of the year. It includes the stock values of 100 large companies from the Stoxx Global 1800 index with the highest dividend yields in North and South America, Asia and Europe. The index also contains only companies whose dividends have not fallen in the past five years. If you look at the total return of the index, the bottom line is even a price increase of one percent.
advertisement
