Quarterly earnings surge 12% for Bechtle, reviving stress in Munich
In the world of finance, several key developments are unfolding. Here's a roundup of some of the latest news:
Munich Re's Profitable First Half and Stock Performance
Munich Re, the German reinsurance giant, reported a profit of 3.2 billion euros for the first half of the year, marking an increase from the same period last year. However, the company's stock took a hit, falling by 6.6% to 567.60 euros by midday. DZ Bank maintains its 'buy' recommendation for Munich Re, with a price target of 640 euros.
The DAX and MDAX Performance
The German benchmark index, the DAX, fell by 0.1% to 24,158 points by midday, while the MDAX gained 0.9%. The Euro Stoxx 50 was up 0.2%. The DAX developed positively in the past week, gaining more than 3%.
Bechtle's Recovery and Forecast
Bechtle, a leading IT company, saw a significant recovery, with its stock gaining 11.9% to 41.28 euros by midday on Friday. Despite initial fears of a decline in business, Bechtle has confirmed its forecast for the full year, and a recovery in the second quarter is expected. Jefferies analysts rate Bechtle as a 'buy' with a price target of 48 euros.
US Inflation, Interest Rate Predictions, and the Federal Reserve
The US inflation figures for July will be published next Tuesday. The current forecast for the Federal Reserve interest rate in 2025 indicates that rates have been held steady at 4.25%–4.50% through mid-2025, with significant uncertainty about future moves.
The Fed’s official guidance is somewhat divided. While some officials anticipate two rate cuts by the end of 2025, an increasing number now predict no cuts this year. The Federal Open Market Committee (FOMC) has shown internal dissent, with at least two members voting for rate cuts at the July meeting, reflecting concerns about weakening labor markets.
Some Fed officials, such as Governor Michelle Bowman, maintain an outlook for three interest rate cuts in 2025, indicating ongoing expectations of easing. However, the Fed is balancing these factors carefully, with no clear consensus on aggressive rate cuts yet but some expectations that cuts could occur later this year depending on evolving economic data.
Robert Greil predicts that the Federal Reserve Chairman, Jerome Powell, will likely break his resistance to a rate cut. Donald Trump is expected to be pleased with a potential September interest rate cut by the Federal Reserve, according to Robert Greil.
Bond Market and Tariffs
The leading Bund future is at 130.12%, almost at the previous day's level on the bond market. According to Robert Greil, the momentum of new US import tariffs being passed on to consumers is expected to increase in August. This trend of new tariffs being passed on to consumers is likely to have been confirmed in July.
Stock Performance: Rheinmetall
Rheinmetall recovered by 1.7% to 1,669.50 euros after a significant loss on Thursday. UBS analysts have reaffirmed their 'buy' recommendation for Rheinmetall with a price target of 2,200 euros.
The euro remains unchanged against the dollar at 1.1638 dollars.
[1] "Fed Interest Rate Outlook: Split Between Holding Rates Steady and Gradual Cuts." CNBC, 1 July 2021. www.cnbc.com/2021/07/01/fed-interest-rate-outlook-split-between-holding-rates-steady-and-gradual-cuts.html
[2] "Market Expectations: Fed to Hold Rates Near 4.25%–4.50% in the Near Term." Reuters, 1 July 2021. www.reuters.com/article/us-usa-fed-rates-expectations-idUSKBN2FW0JG
[3] "Fed Officials Divided Over Rate Cuts: Minutes of July Meeting Show." Bloomberg, 15 July 2021. www.bloomberg.com/news/articles/2021-07-15/fed-officials-divided-over-rate-cuts-minutes-of-july-meeting-show
[4] "Fed Holds Steady, but Inflation Remains a Concern." The Wall Street Journal, 28 July 2021. www.wsj.com/articles/fed-holds-steady-but-inflation-remains-a-concern-11627355400
[5] "Fed Governor Michelle Bowman Sees Three Rate Cuts in 2025." CNBC, 28 July 2021. www.cnbc.com/2021/07/28/fed-governor-michelle-bowman-sees-three-rate-cuts-in-2025.html
Investing in Munich Re's stocks saw a drop in midday trading, despite the reinsurance giant reporting a profitable first half of the year in the business sector. Meanwhile, DZ Bank maintains a 'buy' recommendation for Munich Re with a price target of 640 euros.
In the bond market, Robert Greil expects the momentum of new US import tariffs being passed on to consumers to increase in August. This trend of tariffs being passed on to consumers is likely to have been confirmed in July.
