Stock exchange in Frankfurt: Dax gives way

Concerns about the economy and inflation caused prices on the German stock market to collapse on Tuesday.

Stock exchange in Frankfurt: Dax gives way

Concerns about the economy and inflation caused prices on the German stock market to collapse on Tuesday. By the early afternoon, the Dax had fallen by 0.85 percent to 15,769.56 points, after slipping to its lowest level in a good month. However, the leading index remained in the range of the past trading days between around 15,700 and a good 16,000 points.

The MDax of medium-sized companies fell by 0.75 percent on Tuesday to 27,807.34 points. The Eurozone leading index EuroStoxx 50 lost 0.94 percent.

There was bad news from China again this morning: Both retail sales and industrial production fell short of expectations in July. In order to support the weakening economy, the Chinese central bank is now turning the interest rate screw again. The interest rate for loans with a one-year term has been lowered. However, the move failed to reassure investors and was seen more as an acknowledgment that the economy had weakened significantly.

Recently, reports of payment difficulties from large companies in China's real estate industry had also caused nervousness on the financial markets. According to the analyst Bernd Krampen from the Landesbank NordLB, undesirable developments on the real estate market can lead to serious asset losses, payment difficulties and ultimately to a slump in consumption.

"The economic engine China is losing momentum," summarized market analyst Christian Henke from the trading company IG. With the exception of the strong recovery in the pandemic year 2021, the trend in growth is pointing south.

From an industry point of view, real estate values ​​in particular had to accept significant losses throughout Europe and also in Germany. Real estate companies groan under the rising capital market interest rates in Western countries in view of the central banks' fight against high inflation. This could continue for some time, as recent data from the UK shows. Wages and salaries continue to rise sharply there. The wage development is an indication of continued high inflation and is likely to put additional pressure on the British central bank.

However, due to the rise in interest rates, the financing of real estate companies through borrowed capital is becoming significantly more expensive. In addition, sales from their portfolios are made more difficult because the costs for potential buyers increase. At the end of the Dax, Vonovia shares fell by more than two percent.

With a minus of 4.5 percent, the Encavis shares were the biggest losers in the MDax. The operator of solar parks and onshore wind turbines had previously presented business figures and confirmed the annual targets. All in all, the company's second quarter was weak, as expected, wrote analyst Martin Comtesse from the investment house Jefferies. Falling energy prices and unfavorable weather conditions in core markets had a negative impact. The company also spoke of higher interest rates for new projects.

The euro last cost 1.0914 US dollars. The European Central Bank set the reference rate at $1.0930 (Friday: $1.1004) on Monday. The dollar thus cost 0.9149 (0.9088) euros. On the bond market, the current yield rose from 2.63 percent on the previous day to 2.71 percent. The Rex pension index fell by 0.50 percent to 123.38 points. The Bund future fell by 0.56 percent to 130.50 points.

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