The Hannover Re share

Stock market environment

The stock market environment was broadly favourable in the 2010 financial year, despite considerable volatility and uncertainty among the market players. A brief upswing at the turn of the year very quickly gave way to a sharp correction – triggered by reports of possible sovereign default by Greece and discussions surrounding the solvency of a number of other European countries. From the end of February onwards markets underwent repeated swings – sometimes of a violent nature – in various directions. These lasted several weeks at a time and were fed largely by economic news. The protracted uncertainty prevailing on financial markets prompted further restraint as the third quarter got underway. This was due to growing concern about a possible double-dip recession in the United States. The prospect of a further cut in interest rates and the supply of liquidity by the Federal Reserve nevertheless served to soothe investors as the weeks passed. Finally, towards the end of the third quarter, the major equity markets also began to recover appreciably.

The Dow Jones had gained 11.0% by year-end, while the Nikkei closed 3.0% down on the beginning of the year. The DAX, which had started 2010 at 5,957 points, ended the year only just below the 7,000 mark at 6,914 – an improvement of 16.1% on the previous year’s closing date. The MDAX put on as much as 34.9% in the same period.