German Stock Market

It was a very buy week for Giorgos Papandreou, ex-premier of Greece, and so it was for the DAX.

The Greek premier proposed a referendum on the EU’s austerity package for his country, had to face harsh criticism for that move by Germany and France, was threatened with early elections, scrapped the referendum idea, had to counter fears that Greece would soon drop out of the Euro (or even the EU), won a vote of confidence on Saturday and nevertheless agreed to step down on Sunday evening.

Papandreou tried too hard and too late. After a real rollercoaster ride, he pushed himself out of bounds. Game over.

A new Greek technocrat goverment formed by socialists and conservatives alike shall watch over the execution of the EU-ordered budgetary cuts and Papandreou won’t be part of that. Some sources claimed that former ECB board member Lucas Papademos could be the right man to do the job. Once the new government’s business will be completed, elections will be held in Greece.

The DAX followed the ups and downs of the political turmoil and finished the week just below the critical 6,000 threshold. Not even a surprise rate cut by the ECB, now headed by Mario Draghi, could set things right. All hopes that the G20 summit in Cannes would lead to more material results to cope with the crisis evaporated in due course. The only tangible idea was to refinance the EFSF crisis fund via extra special drawing rights, issued by the IMF. However, this motion was turned down by Germany.

The main topic now, i.e. whether Greece will exit the Euro or not, is still being debated intensely. Although some Greek news sources over the weekend did indeed claim that an exit from the Eurozome could be reached almost immediately, its is not quite that easy. The Lisbon treaty only allows a country to exit the Eurozone while parallely exiting the EU (which nobody wants Greece to do). Naturally, an agreement of some sort can be reached but that may take some time. Until then, nobody really knows.

There is not much room for celebrating now. Germany, the locomotive of the European economy, is still losing steam. The German release calendar has industrial production on Monday, trade balance data on Tuesday and final CPI on Thursday. Anything that indicates a further cooling of the economy at this point could additionally dampen an already tense market sentiment.

I would guess that upcoming quarterly numbers to be reported in the coming week, e.g. by Munich Re, would have to be of an extraordinarily sound quality to stem against the tide of probably sobering news. And, apart from financials, which single stocks really matter in these troubled days?

(Ulrich Schueppler)

Photo credit: Flickr/ Thyago