2023-12-06 00:00:27
Driven by the prospect of key interest rates falling again, the Dax broke its four-month-old record on Tuesday. At 16,551 points, the leading German index exceeded its four-month-old record by a good 22 points. Ultimately, it closed 0.78 percent higher at 16,533 points. “The all-time high acted like a magnet in the past few days and was finally jumped over today,” commented Konstantin Oldenburger from broker CMC Markets. The DAX refuses to give in and thus go into a correction.
The year-end rally continues. In November alone, the DAX gained 9.5 percent in value. Starting from the interim low in October, which at 14,630 points was still close to the annual low in March, it has now increased by 13 percent.
The most important selling point in recent weeks has been the hope that the central banks in the European Monetary Union and the United States will have finished raising interest rates – and will even begin to reduce interest rates again next year. Investors are expecting a tailwind for the economy from falling interest rates, after inflation pressure had recently noticeably eased. Since excessive inflation is harmful to the economy, the central bank had to counteract this by raising key interest rates.
The American Federal Reserve, for example, has raised its key interest rate by more than five percentage points since March 2022. The rapid inflation was triggered, among other things, by the rise in energy prices after the Russian attack on Ukraine. The euro currency watchdogs have raised interest rates significantly from their lows.
Inflation has now also fallen significantly in the Eurozone. Consumer prices in November were 2.4 percent higher than in the same month last year. A year ago it was 10.1 percent.
Given the “remarkable” decline in inflation, the European Central Bank may well be keeping the door closed for further interest rate hikes for now, according to ECB Director Isabel Schnabel. “Recent inflation figures make another rate hike unlikely,” she said. “The final nail in the coffin for further interest rate increases, even if no one expected them,” said economist Andrzej Szczepaniak from the financial house Nomura.
“The phase of interest rate increases is over”
Shortly before the weekend, a speech by the head of the American Federal Reserve, Jerome Powell, gave further fuel to investors’ interest rate expectations. Although he had reiterated his willingness to raise interest rates further if necessary, he also said that monetary policy was already quite restrictive.
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“Everything is just falling into place for stocks at the moment, and the Fed chief didn’t sound strict enough on Friday to really put a stop to the current euphoria,” explained analyst Jochen Stanzl from broker CMC Markets.
Professional investors have long been expecting that monetary policy will enter a new phase. “The phase of interest rate increases is over,” said Frank Engels, the board member of the fund company Union Investment responsible for capital investments, recently at a financial conference in Main. “Stocks will be the best asset class next year,” he predicted.
US stock markets cautious ahead of labor market report
On the US stock market, however, prices fell moderately on Tuesday, as they did at the beginning of the week. The rally that began at the end of October has stalled. According to stockbrokers, this is mainly due to upcoming economic data; the important labor market report for November is on the agenda on Friday. In addition, a negative comment from the rating agency Moody’s on China’s creditworthiness is weighing on the mood somewhat.
However, the Dow Jones Industrial, the S&P 500 and the Nasdaq 100 had gained double-digit percentages from their lows in October and were recently heading towards historic highs. On Friday, the Dow rose above 36,000 points for the first time since January 2022 and was therefore close to its record high.
On Tuesday, the Dow fell 0.22 percent to 36,124.56 points. The market-wide S&P 500 closed moderately in the red by 0.06 percent at 4,567.18 points. For the technology-heavy Nasdaq 100, however, it was ultimately enough for an increase of 0.24 percent to 15,877.71 points.
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