Do These Numbers Bode Well or Ill for Germany?
Germany Bucks the Trend
2015 got off to a rocky start for Europe as the Euro sank to a ten-year low against the U.S. dollar, and concerns arose that a new Greek government might consider exiting the Eurozone in what could be a messy process.
Germany, on the other hand, was blessed with a slew of mostly-positive news in the first full trading week of the new year. The biggest news was that unemployment dropped to its lowest level since the German reunification of 1990. New data released on Wednesday showed that retail sales climbed for a second straight month in November, and October industrial orders numbers were revised upwards. Inflation is at a five-year low.
True, November’s industrial orders fell a steeper-than-expected 2.4%, but this was outweighed by the positive news. Economist Alexander Krueger at Bankhaus Lampe explained, “We had two months of very strong growth, so a recoil is normal.” The German economy ministry agreed: “All in all, industry orders have been trending lightly upwards since the middle of the year despite the present drop,” it said in a statement predicting a fourth-quarter increase in orders overall.
This highlights the continuation of a trend that has me concerned: all too frequently, economic news seems to show a disconnect between Germany and the rest of the Eurozone. For example, even as Germany posted a record-low unemployment rate, Italy’s hit a record high. While Germany’s inflation rate is low but still positive, Spain has already fallen into a deflationary spiral.
While it’s unclear exactly how this scenario will play out, I worry that it may cast a shadow over Germany’s bright future. But for now, I think Germany’s positives outweigh Europe’s negatives, making this a good time to invest in German stocks.
The Major Indices
The charts of most of the major German indices were U-shaped this week (as of Friday’s close on 1/9/2015). The DAX (the 30 largest companies on the Deutsche Börse), for example, dropped sharply on Monday from an opening of 9,735 to close below 9,500 for the first time since mid-December. But the markets came roaring back on Thursday, with the DAX jumping above 9,800, settling back slightly on Friday to finish the week at 9,648.50.
Similar patterns could be seen in the MDAX (the next 50 largest German companies, excluding tech), the TecDAX (the 30 largest tech companies), and the HDAX (comprised of all companies on the DAX, MDAX, and TecDAX), all of which finished the week better than they started it. The SDAX (the 50 small- and mid-cap companies just under the MDAX in size), however, failed to rally on Thursday with its peers, closing the week down 1.25% at 7,156.58. The EuroStoxx 50 (an index of 50 large-cap Eurozone stocks) also ended the week 2.4% lower.
Tops and Flops for the Week
TOP: STRATEC Biomedical AG (WKN:728900)(ETR: SBS)(FRA: SBS) rose almost 10% on Thursday, helped along by investor confidence that the biomedical/pharmaceutical sector could weather a potential economic downturn better than other sectors. This also helped boost shares of fellow biotech company BB Biotech (WKN:A0NFN3)(ETR: BBZA)(FRA: BBZA), up 4.67%, and pharmaceutical giant Bayer AG (WKN:BAY001)(ETR: BAYN)(FRA: BAYN), up 4.2%.
TOP: Shares of Manz AG (WKN:A0JQ5U)(ETR: M5Z)(FRA: M5Z) jumped more than 18% on Wednesday, after the high-tech equipment manufacturer announced multiple major orders for its lithium-ion battery segment, totaling about 40 million Euros. The company has developed a smaller lithium-ion battery that has a longer service life, CEO Dieter Manz said. “The potential for us as a leading high-tech equipment manufacturer in the lithium-ion battery segment is huge,” he added.
FLOP: Lufthansa (WKN:823212)(ETR: LHA) (FRA: LHA) was the lone DAX stock to close down on Thursday, losing almost 1.5%. The terrorist attack on French magazine Charlie Hebdo had investors concerned about other terrorist attacks, concerns which naturally disproportionately affect the airline industry. On a side note, speaking as a writer who often takes a humorous and irreverent look at serious issues, I’m horrified by the Paris massacre and offer my condolences to the victims and their families.
TOPS: German automotive stocks had a good week, with Daimler (WKN:710000)(ETR: DAI) (FRA: DAI) reporting a 3% increase in US sales in December and unveiling a self-driving concept car at the Consumer Electronics Show in Las Vegas. Fellow carmaker BMW (WKN:519000)(ETR: BMW)(FRA: BMW) likewise saw its stock rise throughout the week, after reporting North American sales increases of 9.5% in December, with particularly strong Rolls-Royce sales.
Der Bärenmarkt-Überlebensguide: Wie du mit einer Marktkorrektur umgehst!
Ein erneutes Aufflammen von Corona in China, Krieg innerhalb Europas und eine schwächelnde Industrie in Deutschland in Zeiten hoher Inflation und steigender Zinsen. Das sind ziemlich viele Risiken, die deinem Depot nicht guttun.
Hier sind vier Schritte, die man unserer Meinung nach immer vor Augen haben sollte, wenn der Aktienmarkt einen Rücksetzer erlebt.
John Bromels has no positions in any of the stocks mentioned. The Motley Fool recommends BMW.