German shares faced a challenging start to the new trading week as expectations loomed over incoming private sector updates for Germany and the broader eurozone. These updates are anticipated to provide little reassurance regarding the state of the economy, adding to the sense of unease among investors. In alignment with a regional downturn among European blue-chip indices, the DAX index experienced a decline of 1.00% by the market's close. Anticipation surrounds the forthcoming October flash PMI reports for major economies, scheduled for release on Thursday.
Previous results from these surveys have underscored the continued economic downturn in Germany, raising renewed concerns about the potential for another recession in Europe's largest economy. The HCOB Composite PMIs for both Germany and the eurozone are expected to remain in contraction territory.
Analysts estimate that the index specifically for the eurozone will slightly miss the no-change threshold of 50 points, landing at 49.9, a marginal improvement from the previous month’s 49.6. Similarly, while the corresponding index for Germany is also predicted to show slight improvement, it is still projected to remain in contraction. "The main focus in the euro area this week will be the results of various October business and consumer sentiment surveys.
After ECB President Lagarde emphasized the weakening growth momentum suggested by the September PMIs as a pivotal reason for the Governing Council's more dovish stance, significant attention will be directed towards the flash October PMIs (on Thursday). Given the persistent weakness in new orders, the headline euro area composite PMI is expected to maintain a broad sideways movement at September's level of 49.6, indicating stagnation into the beginning of Q4," commented analysts at Daiwa Capital Markets. In the corporate sector, Infineon Technologies ($IFX) saw a drop of 2.58% after Morgan Stanley downgraded its rating for the semiconductor manufacturer to equal-weight from overweight, with the price target adjusted downward from 37 euros to 30 euros. Conversely, Fresenius ($FRE) stood out as the top gainer, appreciating by 0.84%.
Berenberg has maintained its buy rating on this German healthcare group after it reaffirmed its full-year 2024 guidance the previous week. Investors should closely monitor the upcoming reports and corporate updates as they navigate this challenging economic landscape..