Why rising US yields shouldn’t trigger a crash

At the beginning of today’s trading day, 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. After today’s slide to 13,802 points, there was a high demand that drove the Dax back up.

 The  Handelsblatt survey Dax-Sentiment delivers astonishing results.

 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.

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 a rather rising share price. 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

 The  greatest threat to the stock markets is currently the development of the world’s most important bond market: the US government bond market. Today, Monday, the yield on a ten-year bond climbed to 1.38 percent, the highest value in a year.

That has more than doubled since August last year.

 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, it could become uncomfortable on the stock markets. 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.

 The  danger behind 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 be reducing 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.

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

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

After the slump in the markets, a brilliant rally followed.

 The  Dax rose again by 25 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.

 The  German benchmark index rose by around twelve percent in the same period.

 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 currently minus 0.292 percent since the beginning of January.

 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.

View of the Varta share

Varta:

 The  share price falls 8.2 percent to EUR 120.50.

 The  analysts at Berenberg Bank downgraded the battery manufacturer’s shares to “Hold” from “Buy” and lowered the price target to 130 from 145 euros. On Friday they went off the market at 131.30 euros.

Delivery Hero:

 The  shares of the food delivery service got under the wheels on Monday.

 The  papers surrendered up to 4.6 percent to 116.05 euros.

 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.

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

Bitcoin is slipping

Bitcoin is running out of breath on its record hunt.

 The  price drops two percent to $ 56,260.

 The  oldest and most important cyber currency hit a record high of $ 58,354 on the Bitstamp trading platform on Sunday. On Friday, according to data provider Coinmarketcap, all Bitcoin in circulation were worth more than a trillion dollars for the first time.

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.

 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.

 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.

 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.