Vienna Stock Exchange News

Market analysis: The air on the stock markets is getting thinner

Andreas Perauer

The Austrian stock market continued its rally since the low for the year at the end of September 2022 at the beginning of this year. The emerging mild winter was able to significantly reduce the concerns surrounding the issue of gas shortages, which were particularly prevalent in Austria and Germany. A solid reporting season and the unexpectedly resilient economic development provided additional optimism. The industrial sector in particular was able to surprise positively thanks to relaxed supply chains and bulging order books. China also provided a tailwind after the end of the zero-covid policy. This positive outlook led to a significant rise in the stock markets in January and February. On the other hand, inflation remained very persistent and forced the central banks to maintain their restrictive course. One effect of this central bank policy could be observed in March in the events in the banking sector. The bankruptcy of several US banks caused great uncertainty in the market, which spread to Europe at the latest when the major Swiss bank Credit Suisse ran into difficulties. However, the rescue of the bank was able to prevent worse and it also became apparent that the broad banking sector has learned from the great financial crisis of 2008 and is now in a much more stable position. Nevertheless, the ATX, which is heavily weighted towards the financial sector, fell by around 10 percent in March, which was significantly more than the German DAX or the broad European Stoxx600, for example. 

Since then, the stock markets and especially the Austrian market have been moving more or less sideways. Even the current surprisingly good reporting season can hardly provide any impetus. This indicates that the positive results were anticipated and are already reflected in the current prices. So the air to the upside is getting thinner and thinner. The end of the interest rate hike cycle could act as a positive catalyst. In the US this has probably already been reached, in the EU one to two rate hikes are still priced in. After that, it will be interesting to see how quickly the ECB moves back towards rate cuts. This will depend to a large extent on the persistence of inflation and the further development of the economy; accordingly, the eyes of capital market participants will be particularly focused on these data, as they have been for some time. 

Andreas Perauer, MSc
Fund Manager
Raiffeisen KAG
30 May 2023

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