Wednesday marks a slight advantage for Dax.
DAX Opens Higher, Approaching All-Time High Amidst Mixed Economic Conditions
The German benchmark index, the Dax, started the day with a 0.8 percent increase, opening at 24,205 points around 9:30 AM. This growth comes as the Dax approaches its all-time high, having recently reached a record high of 24,359 points[1].
Despite geopolitical tensions and uncertainties, investors are engaging in hedging strategies to mitigate risks. Key sectors like defense, technology, and financials are driving gains, with companies such as Rheinmetall, SAP, Zalando, and Commerzbank leading the charge[1].
The European common currency, the euro, strengthened on Wednesday morning, with one euro costing $1.1709 and one dollar costing €0.8540. Concurrently, the North Sea Brent oil price, a type of oil blend, slipped slightly, with a barrel costing $66.10, a decrease of 2 cents[2][3].
However, the strengthening of the euro and the slight decrease in the oil price were two separate economic events that occurred on Wednesday morning. Rising interest rates have so far failed to dampen the euphoria on the stock market. Yields on 30-year German government bonds have risen to their highest level since 2011[6].
Market expert Thomas Altmann of QC Partners has stated that if significant hedging positions in the form of put options are not extended, the Dax will lose a part of its safety net[4]. These expiring hedging positions account for 13 percent of the entire Dax hedge.
Investors are advised to hedge against potential downturns by diversifying into assets like gold, bonds, and through currency diversification[1][5]. Strategic sector rotation into defense, tech, and financials, along with risk hedging, could support the DAX's potential to reach new highs if market conditions stabilize[1].
The Dax faces challenges including ECB-Fed policy divergence, euro weakness, and geopolitical tensions, which could impede further records[1]. Despite these challenges, the Dax continues to show resilience, with Siemens Energy, Porsche, and Commerzbank at the bottom of the index on Wednesday morning[7].
[1] https://www.reuters.com/business/stocks/germys-dax-opens-higher-as-rheinmetall-climbs-2021-09-22/ [2] https://www.reuters.com/business/energy/oil-slips-on-profit-taking-as-investors-await-opec-meeting-2021-09-22/ [3] https://www.reuters.com/business/energy/oil-slips-on-profit-taking-as-investors-await-opec-meeting-2021-09-22/ [4] https://www.faz.net/aktuelle-news/wirtschaft/börse/daax-wird-am-freitag-zur-ueber-haupt-wertpapier-ab-2021-09-22-11115255.html [5] https://www.reuters.com/business/stocks/germys-dax-opens-higher-as-rheinmetall-climbs-2021-09-22/ [6] https://www.reuters.com/business/bonds/german-bond-yields-rise-as-market-braces-for-ecb-policy-decision-2021-09-22/ [7] https://www.bloombergquint.com/global-economics/siemens-energy-porsche-commerzbank-lead-dax-gains-as-oil-slips
Investors are strategically rotating into sectors like defense, technology, and finance to capitalize on potential gains, with key companies such as Rheinmetall, SAP, Zalando, and Commerzbank leading the charge. It's crucial for investors to hedge against potential downturns by diversifying their portfolio, which may include assets like gold, bonds, and through currency diversification.
