Your Weekly German Stock Review (11/17/2014 – 11/21/2014)

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

Market update

Just when we thought that the week was over, fireworks rocked the German market on Friday, thanks to ECB chief Mario Draghi and the People’s Bank of China (PBOC).

In a statement, Draghi reiterated that he will do what he can to strengthen the economy in the Eurozone. And, almost simultaneously, market watchers noticed that the PBOC had loosened its monetary policy. This combination thrilled investors, and the DAX shot past 9,700 today to close 2.6% higher. Pretty awesome finale for the DAX’s best week of the year (up 6.22%)!

If you want to know what else happened in this record-setting week, read on.

All of the following figures are from market close on 11/20/2014 unless otherwise specified.

The major indices

The DAX (the 30 largest companies on the Deutsche Börse) may not have been hurt by the lackluster economic data of the past few weeks, but it sure loved this week’s good economic news (see below)! It soared from its opening of 9,162 to flirt with 9,500, its highest point since September, up 3.5% at Thursday’s close.

The other indices likewise finished the week higher, with the MDAX (the next 50 largest German companies, excluding tech) up 2.2%, the TecDAX(the 30 largest tech stocks) up an astonishing 5.1%, and the HDAX (all stocks on the DAX, MDAX, and TecDAX) up 3.3%. The German indices led the Euro Stoxx 50 index (50 blue-chip Eurozone stocks), which tumbled on Thursday after disappointing Eurozone October manufacturing numbers were released, but was still up 2% for the week.

And We’re Back!

Last week closed with a bit of mixed news. The good news was that Germany avoided recession. The bad news was that it was only by the hairs of its chinny-chin-chin, with the economy growing a nearly-imperceptible 0.1%.

This week brought more concerns, this time about Russia. German Chancellor Angela Merkel predicted a “long, drawn-out confrontation with Moscow” after a lengthy and fruitless discussion with Vladimir Putin at the G-20 summit in Brisbane, Australia. Nour Al-Hammoury, chief market strategist at ADS Securities, thinks this is a big deal.  “Economic activity in Europe is deteriorating due to the global slowing and has not been helped by the Russian sanctions,” he said.

But all that was forgotten on Tuesday, as the Centre for European Economic Research (ZEW) reported that its survey of economic sentiment jumped to 11.5 in November, way up from -3.6 in October and far better than the consensus forecast of 0.9. This was the shot in the arm the markets needed, and the major German – and indeed, European – indices jumped higher on the news.

The report had analysts upbeat about Germany’s economic future. “Improving surveys signal more robust growth again in 2015,”said BNP Paribas economist Evelyn Herrmann. Jennifer McKeown at Capital Economics agreed: “The fact that the index is back in positive territory means that the majority of investors now see economic conditions improving in the next six months. After the disappointing weakness of the Germany economy in Q2 and Q3, this is an early encouraging indication that the recovery will resume.”

It’s interesting to me how one small report on economic sentiment seems to have had more upside effect on the markets than weeks of tepid reports had on the downside. But most of those disappointing reports were about current conditions, while this one is looking ahead to future conditions. Meaning perhaps this time things really are starting to look up (knock on wood!).

This Week’s Winners and Losers

WINNER: SMA Solar Technology AG (ETR: S92) (FRA: S92), which had the best performance on the HDAX two days this week (Monday, up 5.83%, and Wednesday, up 4.54%) and was in the top ten on Tuesday and Thursday as well. Overall, it was up 15% in just the first four days of the week. What did they do to deserve such a huge gain? Well, nothing, apparently. Analysts’ best guess is that as the world’s largest manufacturer of solar inverters, the company is benefitting from positive news elsewhere in the industry, including a partnership between German solar panel maker Solarworld AG (ETR: SWVK) and US. microinverter producer Enphase Energy.

WINNER: Electronic payments processor Wirecard AG (ETR: WDI) (FRA: WDI) , which had the best performance on the HDAX on two other days this week (Tuesday, up 4.5%, and Thursday, up 4.95%), after reporting strong Q3 earnings in which both revenues and profits were up. On Thursday, it also announced a new partnership with airline marketer Hahn Air.

LOSER: Tech systems manufacturer Manz AG (ETR: M5Z) (FRA: M5Z), which fell 3.88% on Thursday, the biggest one-day loss on the HDAX this week. This despite a report by analyst Thomas Rau of Montega AG reiterating a Buy recommendation for the stock. Investors may have been concerned about lost display unit sales resulting from the GT Advanced bankruptcy and potential weakness in the solar unit.

WINNER: ThyssenKrupp AG (ETR: TKA) (FRA: TKA) jumped almost 2.5% on Thursday, after reporting its first net profit in four years. The company also announced it will resume paying dividends a year earlier than expected, giving investors confidence that Germany’s largest steelmaker is successfully turning its business around.

Have a great weekend!