Your Weekly German Stock Market Review (10/20/2014 – 10/24/2014)

Figures in this article reflect prices as of market close on 10/23/2014.

In this weekly feature, we’ll give a brief snapshot of the big stories and big stock moves that shaped the markets.

The major indices

It was, by and large, a decent week for the DAX. Most of its 30 stocks showed modest gains, and the index itself rose to over 9,000, continuing upwards from the lows it hit in the middle of last week. It still has a ways to go, however, to get back to the highs it set over the summer, or even to the 9,600s of a month ago. The MDAX (the next 50 largest German stocks, excluding tech), the TecDAX (the 30 largest tech stocks), and the HDAX (all stocks on the DAX, MDAX, and TecDAX), performed similarly, all rising.

All eyes on the banks

On Thursday, Germany released strong economic data, particularly in the manufacturing sector, where PMI rose in October to 51.8, higher than the growth threshold of 50. Analysts had expected a drop, so this was welcome news. “It calls for a sigh of relief,” wrote Thomas Gitzel, Chief Economist at VP Bank.

On the heels of this announcement, the Eurozone announced that the PMI for the services sector would hold at 52.4 points, also beating analysts’ expectations of 52 points even.

So with all this good news, why weren’t the market’s gains higher? Well, many investors across the globe are wary of the upcoming results of the European Central Bank’s stress tests, due to be released over the weekend. Shares of some European banks tumbled on Wednesday after a Spanish newswire report claimed that 11 European banks were going to fail the stress tests. The ECB immediately responded with a statement that any inferences would be “highly speculative” until the final numbers are released on Sunday. Most banks expressed confidence that they would pass, but these concerns are still weighing on the markets.

The week’s winners and losers

WINNER: Shares of shoemaker Adidas AG (ETR: ADS) (FRA: ADS) were up more than 8% for the week after a Sunday report that an investor group will bid an estimated $2.2 billion for troubled brand Reebok.

LOSER: Enginemaker Deutz AG (ETR: DEZ) (FRA: DEZ) reported an unexpected charge would interfere with its 2014 earnings forecast, and shares sank 11% in response on Tuesday.

LOSER: LPKF Laser & Electronics (ETR: LPK) (FRA: LPK) downgraded its revenue and earnings targets for the year, blaming “faltering global growth and and the slowdown in the electronics industry in particular.” The stock dropped a staggering 21% on the news. This may be an opportunity to buy if you agree with LPKF management that “All trends in electronics production point toward increased use of high-precision laser technology.” LPKF will release its 2015 forecast on November 12.

WINNER…KIND OF: Biotech company MorphoSys AG (ETR: MOR) (FRA: MOR) raised its earnings forecast for 2014, citing a milestone payment from its partner Janssen Biotech and a partial shifting of development costs to 2015. Its stock rose 5.28% on the news on Thursday. Why only a “kind of” winner? It still expects to post an EBIT loss of 5-8 million Euro (although that’s down from the prior forecast of 11 million).

Have a great weekend!