BMW profit warning weighs on the Dax: Slight losses expected at the start of trading

BMW shares fell as much as twelve percent in early trading, only stabilizing at a low last seen in 2020 at just under 60 euros. At last, the discount was still 6.5 percent. Although the price plunge narrowed significantly during the trading day, the company remains clearly under pressure.

Management cited market weakness in China and the consequences of the Iran war as reasons for the drastic margin outlook. The automaker BMW is significantly cutting its annual forecast due to the crisis in the Chinese car market and the consequences of the Middle East war. The negative development in the Chinese automotive market had accelerated further in the second quarter, it was said by way of explanation. This leads to tougher competition in China and in countries of the Asia-Pacific region, from which BMW cannot escape.

Impact on the automotive industry

According to Deutsche Bank analyst Tim Rokossa, the cut itself is no surprise, but its extent certainly is. JPMorgan analyst Jose Asumendi described the BMW warning as a wake-up call for the entire automotive industry. The warning immediately spilled over to other manufacturers: Mercedes-Benz fell by three percent, and Volkswagen preference shares also lost 2.3 percent. Automaker shares were by far the hardest hit.

In initial early indications, the DAX is expected to be nearly half a percent lower. Yesterday, the German leading index had edged up 0.1 percent to 24,910 points. During the course of Wednesday's trading, the DAX stood at around midday slightly in the red by 0.15 percent at 24,872 points. The DAX had already tested the 25,000-point mark twice in the same week and fallen back each time, underscoring investors' caution.

DAX between caution and hope

Europe's leading stock exchanges were largely unchanged in early trading. The MDAX rose half a percent to 32,748 points. Burdening effects from the US Federal Reserve meeting are not to be expected, the Helaba analysts write in their daily outlook. The currency guardians will likely continue their monetary policy course and not announce any rapid key interest rate hikes for the time being, according to the experts.

Beyond the automotive stocks, individual titles managed to escape the weak overall trend. Here, shares of ASM International, ASML, and BE Semiconductor each climbed at least two percent. Technology stocks were most in favor with investors. Aixtron and PVA TePla also gained up to five percent. Oddo BHF analyst Stephane Houri sees the semiconductor sector remaining well positioned in a study and pointed to the ongoing momentum around artificial intelligence.

Winners: Semiconductors and individual stocks

Also among the winners: AUTO1 rose by 8.5 percent following the used car dealer's capital markets day, reaching a new high since early February. The company had announced a medium-term target of 1.5 million vehicles sold. Hapag-Lloyd shares jumped by 6 percent at one point after "Manager Magazin" reported possible interest from competitor MSC in the shipping company. During the course of trading, however, the gain melted to half a percent as the initial enthusiasm faded.

Defense stocks were also in demand again in the trading session. Mark Luschini, chief investment strategist at Janney Montgomery Scott, commented: "We had a big move in the market yesterday. We are digesting those gains now, and the mood in the run-up to the Fed meeting is always somewhat cautious." Investors shifted their money from highly valued technology stocks into economically sensitive sectors such as financials and industrials.

Iran blockade ended: Relief in the oil market

Investors are also keeping an eye on the G7 meeting in the French town of Evian-les-Bains. In addition, news from Tehran caused movement in the morning, according to which the USA has ended its two-month blockade of Iranian ports. The closure of the Strait of Hormuz to shipping is also to be lifted, it was said. The parties to the conflict want to start negotiations on Friday.

US President Donald Trump had announced on Sunday evening that he had agreed on a framework agreement with Iran to settle the fighting. In the morning, a barrel of the North Sea Brent grade was trading at just over 78 dollars per barrel. The background: the geopolitical situation in the Middle East remains a central factor for the markets.

Wall Street mixed

A look at Wall Street: US stock exchanges had closed mixed on Tuesday. The Dow Jones index of standard titles gained 0.6 percent to 51,999 points. During the session, the leading index marked its new record high at 52,190 points. The Nasdaq lost 1.2 percent to 26,376 points, and the broad-based S&P 500 shed 0.6 percent to 7,511 points. On Wednesday morning, trading in Asia was considered robust, with Tokyo's Nikkei index posting moderate gains.

Fed meeting in focus: Warsh's first major test

The focus of interest on Wednesday evening is the US Federal Reserve meeting with the new Fed chief Kevin Warsh. Experts assume that the central bank will leave the key interest rate in the range of 3.50 to 3.75 percent. The markets particularly want to know whether the Fed will remain independent or whether the political influence of the White House will increase, said market observer Maximilian Wienke from broker eToro. Warsh faces a dilemma between fighting inflation and the demands of US President Donald Trump for lower interest rates, Wienke added.

Market observer Jochen Stanzl from broker CMC Markets sees the DAX continuing to have reservations about the 25,000-point mark. The index lacks the spark for a breakout to the upside, Stanzl explained. The 21-day line, which serves as a short-term indicator, recently served the DAX as a close reference. A breakout above the round mark thus failed to materialize for the time being.

A side note from the USA: Shares of the space and AI company SpaceX ended 4.83 percent higher at $201.80, but gave back part of their early gains during the session. At one point, SpaceX shares had surged by a good 17 percent, which would have resulted in a market capitalization of almost three trillion dollars. The company had thus surpassed both the retail and technology giant Amazon and the software giant Microsoft in terms of market value. Elon Musk's space and AI company is now the fifth most valuable company in the world. On just its third trading day, SpaceX thus created a historically unprecedented increase in value of around one trillion dollars since its initial listing.

At the close of trading, caution ahead of the US interest rate decision in the evening shaped events. US investors had already held back the previous evening ahead of the Fed decision. The BMW profit warning had additionally weighed on sentiment, even though the company made back part of its heavy initial losses during the course of the day. Whether the DAX can target the 25,000-point mark again in the second half of the week will likely depend significantly on the signals from Washington.