While one regional bank after the next is in turmoil in the US, the Federal Reserve continues to raise interest rates as if nothing had happened. The key interest rate has now risen another 25 basis points above the five percent mark, which is not exactly likely to ease the situation in the banking sector, which is already under a lot of stress.
Lending standards in the USA are already at a very restrictive level and are having more than a dampening effect on the economy. Even though it may have been the Fed's last interest rate hike of this cycle for the time being, it could have been just one too many that broke the camel's back. Slowed by the smoldering banking crisis, but on the other hand, supported by the continued good balance sheet presentations of the reporting companies, the stock market still remains in a stable lateral position.
16,000 could have been the target
For the DAX, this means staying below the 16,000 mark, which the index briefly surpassed at the start of the week, but then immediately began an orderly retreat. Now, together with the all-time high around the turn of the year 2021/22, a dangerous double top threatens from a technical perspective. If the DAX does not reach the round mark again soon, a sustained downward movement could set in motion from the current level, which could well lead the market towards the 200-day line at just over 14,000 points.
Banking troubles continue in the US
The trading week started with the second largest bank failure in US history and thus the third bank that had to close its doors due to rising interest rates and lack of liquidity. First Republic, which, like Silicon Valley Bank, specialised in start-up financing, is now being taken over completely by JP Morgan.
This creates an extremely unhealthy trend, also because the consolidations in the market lead to the big banks becoming even bigger, which does not exactly make the risks in terms of "too big to fail" any smaller. The crucial question is how long the banks in the USA will be able to continue to give each other a helping hand and when the currently accelerating loss of investor confidence will claim even greater victims. Even the interest rate hike by the US Federal Reserve is unlikely to have helped stop the trend of capital withdrawal from banks.
Mother and daughter are well on the way
Things couldn't be going better for German sports car manufacturer Porsche. In the first quarter, the company increased both turnover and profit by a quarter each. The reason for this was a significantly higher delivery rate, made possible by a decreasing parts shortage. The bottom line left 1.8 billion euros in the Zuffenhausen company's coffers. The parent company Volkswagen (ETR:VOWG_p) can also keep up with the growth rates, despite its broader vehicle portfolio.
The Wolfsburg company was able to increase its operating profit by 35 percent at the beginning of the year. Including special effects, however, the result slumped by 31 percent to 5.7 billion euros. Turnover in the first quarter was up by a good 20 percent.
The US labor market remains robust
And on Friday, a robust labor market greets us in the US every month. 253,000 new non-farm jobs were created in April, once again significantly more than expected. Hourly wages also rose more than expected, by 4.4 percent over the year and 0.5 percent over the previous month.
At the moment, however, it looks as if the stock market is glad not to be thinking about an impending recession and is instead accepting a further restrictive Federal Reserve. Whether it will stay that way should become clear next week, when the support from good quarterly figures from companies disappears.
DAX - current supports and resistances:
- Supports: 15,700/15,650 + 15,550/15,500 + 15,350/15,300
- Resistances: 15,850/15,900 + 16,000/16,050 + 16,200/16,250