Frankfurt Stock Exchange: Hangover sentiment on the stock market after ECB recession warning

After catching up, the hangover mood: Investors on the German stock market pulled the strings on the Thursday before the long weekend.

After the Dax surpassed the 11,200-point mark in early trading, warning statements from the European Central Bank (ECB) in particular put an end to the buying mood. The central bank forecasts that economic output in the eurozone will contract by up to 12 percent in 2020.

The Dax ended the last day of the trading week shortened due to the May holiday with minus 2.22 percent at 10,861.64 points. The weekly increase is thus still around 5 percent. In the whole month of April, Germany’s leading index rose by just over 9 percent, after falling as much as 40 percent during the Corona crash.

The Dow Jones industrial average lost 1.55 percent to 23,043.70 points on Thursday. Across Europe and the US, losses were also recorded, with the euro zone’s benchmark EuroStoxx 50 index losing 2.27 percent to 2927.93. The Cac 40 in Paris also fell more than 2 percent, while the FTSE 100 in London fell as much as 3.5 percent. In the United States, the Dow Jones Industrial fell about 1 percent at the European close.

“The party on the stock exchange yesterday was followed by a hangover mood,” commented CMC Markets analyst Jochen Stanzl, referring to the gloomy outlook for the euro countries predicted by the ECB. According to market analyst Timo Emden, the long weekend is also fuelling the heavy losses: “Especially before stock market holidays, profit taking is tempting,” especially as uncertainty remains high.

The reporting season was also in full swing on Thursday. BASF, the world’s largest chemical company, earned less in the first quarter because of the effects of the Corona pandemic. The Group had already cancelled its outlook for 2020 the previous evening. BASF shares lost 5.2 percent as one of the weakest performers in the Dax.

However, Deutsche Bank’s shares were slightly worse off at a 5.3 percent discount. In the MDax, Commerzbank’s securities held the red lantern at minus 7.5 percent. The market pointed to the ECB’s very gloomy forecasts. ECB President Christine Lagarde spoke of an “unprecedented economic downturn in peacetime with a profound deterioration in the labour market”. In addition, the economic recovery is also associated with a high degree of uncertainty.

By contrast, engine maker MTU performed better in the first quarter than analysts feared. However, due to the Corona crisis, the company expects demand for passenger jets, propulsion systems and spare parts to fall in 2020. The shares closed 2.4 percent lower after up more than 10 percent on Wednesday.

Deutsche Börse shares ended the day up 0.5 percent and have now made up for most of their 40 percent loss from the Corona crash. The exchange operator had benefited from the high level of trading in the financial markets and the increased uncertainty resulting from the pandemic in the first quarter.

In the SDax, the SNP attracted attention after the software provider and IT consultant cut its annual targets, slumping 15.5 per cent.

On the bond market, the Rex bond index rose 0.11 percent to 144.99 points. The yield on circulation fell to minus 0.50 percent from minus 0.48 percent the previous day. The Bund futures were last up 0.80 percent at 174.48. The euro jumped above the 1.09 US dollar mark in the early evening and climbed to 1.0929 US dollars. The ECB set the benchmark rate of 1.0876 (Wednesday: 1.0842) US dollars. The dollar thus cost 0.9195 (0.9223) euros.