Why rising US yields shouldn’t trigger a crash

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Düsseldorf On Monday, the German share index closed 0.3 percent lower and is listed at 13,950 points.

 The  MDax of medium-sized companies lost 1.1 percent to 32,024 points.

© www.de24.news

 The  past trading week was interesting from a technical point of view: It was an “inside week”, the high and low points of the Dax remained within the range of the previous week. And the high of this “inside week” of 14,131 points is identical to the previous record high at the beginning of January. Prices above this mark should quickly lead to a record high of 14,169 points.

On this Monday, however, the Dax slipped in the first hour of trading below the lows of the past two weeks, which were between 13,850 and 13,830 points. Subsequently, however, there was high demand, which drove the Dax up again.

© www.de24.news

 The  Handelsblatt survey Dax-Sentiment delivers astonishing results. © www.de24.news

 The  German benchmark index is trading just two percent below its all-time high, which should actually trigger a cheer in view of the significant price gains in the past weeks and months.

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But the opposite is the case: investors are extremely pessimistic; hardly anyone dares to buy stocks. According to sentiment analysis, this behavior is a contra-indicator and thus an indication of rising prices. For Stephan Heibel, who evaluates the Handelsblatt survey, there is currently a “situation in which it takes courage to enter at the current price level.” But this courage could be rewarded.

Rising US bond market yields

© www.de24.news

 The  greatest threat to the equity markets at the moment is developments in the world’s most important bond market: the US government bond market. Today, Monday, the yield on a bond with a ten-year term climbed to 1.38 percent, the highest value in a year.

graphic

That has more than doubled since August last year. © www.de24.news

 The  reason for this rise in interest rates is on the one hand the general economic recovery after the corona low and on the other hand the expectation of rapidly increasing inflation.

Should the US Federal Reserve abruptly end its expansive bid price, the stock markets could become uncomfortable. Investors shouldn’t forget that.

And there is much to suggest that the rate of return will continue to rise, presumably up to 1.50 percent initially. This level has always been a major turning point in ten-year US bonds over the past few years.

However, higher values ​​are currently not considered likely. Because the current benchmark for the US Federal Reserve is not interest rates, but unemployment. With a recent rate of 6.3 percent and even increasing initial jobless claims, the USA is far from its goal of full employment.

© www.de24.news

 The  danger of rising yields: Investors fear a new so-called “taper tantrum”, as in May 2013. At that time, Fed Chairman Ben Bernanke announced that he would reduce bond purchases. As a result, bond prices collapsed and yields soared. This triggered a kind of shock wave on the global financial markets, which led to severe price distortions, especially in the emerging countries.

© www.de24.news

 The  Dax also slipped by more than twelve percent within a few weeks. A closer look over a longer period of time also shows: © www.de24.news

 The  faults were short-lived. In retrospect, these price losses were an ideal entry point.

Because after the slump in the markets, a brilliant rally followed. © www.de24.news

 The  Dax rose again by 15 percent by the end of 2013. Because there was more than a year between the end of the bond purchase program and the first rate hike by the Fed.

Of course, this scenario will not repeat itself so exactly. Because in 2013 there was a higher interest rate level in the USA. In April 2013, the return was 1.67 percent and rose to around three percent by the end of 2013. By the end of 2014, the return had increased by 33 percent (see graphic). At the end of 2014, the leading German index increased by almost 24 percent.

graphic

© www.de24.news

 The  yield on German government bonds is also increasing significantly. In the ten-year range, this value has climbed from minus 0.600 percent to minus 0.292 percent this morning since the beginning of January. © www.de24.news

 The  yield difference between ten- and two-year Bunds has reached the highest level in almost a year. Such a high yield differential, however, signals a significant economic recovery.

© www.de24.news

 The  commitment of the European Central Bank (ECB) to its bond purchases, however, caused the yield to slide again, the yield fell again within minutes to minus 0.352 percent. ECB boss Christine Lagarde emphasizes that her bank is closely monitoring the development of bond yields and will continue to secure favorable financing conditions for all sectors.

View of the Varta share

Varta: © www.de24.news

 The  share price falls by around ten percent to 117.30 euros. © www.de24.news

 The  analysts at Berenberg Bank downgraded the battery manufacturer’s shares from “Buy” to “Hold” and lowered the price target to 130 from 145 euros. On Friday, the titles went out of trading at 131.30 euros.

Delivery Hero: © www.de24.news

 The  food delivery service’s shares also fell on Monday. © www.de24.news

 The  papers fell by 6.8 percent to 113.45 euros by the end of trading. © www.de24.news

 The y fell to their lowest level in more than two months and were at the end of the Dax.

Traders attributed the price losses to a report in the Wall Street Journal, among other things. Accordingly, more and more restaurants in the USA are trying to bypass the food delivery services such as DoorDash, Uber Eats and Grubhub and their high fees. © www.de24.news

 The y are supported by the local authorities, some of which have already introduced upper limits for the fees.

Lufthansa and IAG: © www.de24.news

 The  shares of Lufthansa and the British Airways parent company IAG each gain more than three percent. Depending on the infection situation, the government wants to lift all corona restrictions by June 21.

Bitcoin is slipping

Bitcoin is running out of breath on its record hunt. © www.de24.news

 The  oldest and most important cyber currency will fall by around five percent to $ 52,884 by the evening, after previously hitting a record high of $ 58,445. “Consolidation is necessary in view of the fact that prices are still overheating,” says analyst Timo Emden from Emden Research. On Friday, according to data provider Coinmarketcap, all Bitcoin in circulation were worth more than a trillion dollars for the first time.

Copper price rises to ten-year high

© www.de24.news

 The  soaring of many metal prices continues. On Monday, the price of a ton of copper on the commodities exchange in London rose to around 9270 dollars. That is the highest level in about ten years. © www.de24.news

 The  record high from 2011 of just under 10,200 dollars is within reach. © www.de24.news

 The  price of nickel exceeded the $ 20,000 per ton mark for the first time in about seven years.

© www.de24.news

 The  current price rally on the raw materials market, especially for many industrial metals, is based on the hope that the economy will improve. © www.de24.news

 The  triggers are corona vaccinations in many countries and the associated prospect of fewer restrictions on public life. Copper in particular is considered a global economic barometer due to its versatile production use. In addition, for many raw materials there is a scarce and rather rigid supply that cannot be quickly expanded in the event of economic improvement.

“It looks as if the market participants want to push the price on the bend and break” to a record high, commented commodity expert Daniel Briesemann from Commerzbank. One reason for the price rally is also to be seen in some high price forecasts. Recently, for example, the large US bank Citigroup said that the price of copper of $ 10,000 was a matter of time. © www.de24.news

 The  price is also strongly speculative, added Briesemann. © www.de24.news

 The  background is the flood of liquidity from many central banks.

What the Dax chart technology says

In addition to the “inside week”, where the high and low point remained within the range of the previous week, the German benchmark index also hangs between two price gaps: Last Wednesday, a small downward price gap was torn compared to the prices on Tuesday, between 14,050 points and 14,036 meters there was no listing during regular trading hours. This gap is now considered the first resistance if the Dax should rise again above the 14,000 point mark.

On the downside, the upside gap from late January is still intact. Such upward price gaps arise when the highest level on one trading day is below the lowest level on the following day. © www.de24.news

 The  opposite applies to downward price gaps.

This upward price gap in figures: on Monday of last week the highest Dax price was 13,648 points, the lowest price on Tuesday of last week was 13,693 points. © www.de24.news

 The  support, which is even more important from a chart technical point of view, is just below that with 13,500 meters. This mark formed resistance for months last year that was not overcome until December. That is why the resistance has turned into support. © www.de24.news

 The  leading index only fell below this once at the close of trading this year.

Here you go to the page with the Dax course, here you can find the current tops & flops in the Dax.





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rising yields shouldnt trigger crash

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