For the first time, the DAX exceeds the 17,000 point mark. But the index cannot maintain this for long: the European monetary authorities are not yet as far along with cutting interest rates as their US colleagues.
The European Central Bank got in the way of the Dax on its record hunt. In contrast to the US Federal Reserve, there were no clear signals from the European monetary authorities that interest rates would be cut soon. After the first jump over the 17,000 point mark, this inhibited the initially unleashed investors over the course of the day.
The leading German index settled just slightly in the red after an increase of up to 1.4 percent. It ended trading 0.08 percent lower at 16,752.23 points. At its peak it rose to 17,003 points, extending its year-end rally to more than 16 percent at times. The MDax, on the other hand, rose by 2.92 percent to 27,198.24 points. There was a need to catch up here, as it has gained significantly less than the Dax this year.
Aggressive expectations
The ECB left interest rates in the euro area unchanged for the second time in a row. Unlike the Fed the evening before, the Europeans did not openly admit that they were discussing interest rate cuts within their ranks. According to ING economist Carsten Brzeski, President Christine Lagarde has pushed back aggressive interest rate expectations. It was said on the market that investors were now pricing in a reduction in the Eurozone key interest rate by less than 1.5 percentage points for 2024.
“Today’s meeting marks the end of the current cycle of interest rate hikes. But it also shows that there is still a long way to go before the ECB starts cutting interest rates,” concluded Brzeski. The monetary authorities probably learned from past mistakes and did not prematurely announce extensive interest rate cuts.
The Dax’s initial push past the 17,000 mark was justified with surprisingly clear words from the Fed. According to their statements, there will be around three interest rate cuts in the USA in 2024. According to market observer Andreas Lipkow, attention is now focused on the expiry date on the futures exchanges. This has the potential to once again cause fluctuations on the international financial markets on Friday.
Real estate values defend profits
The interest rate fantasy remained intact in individual stocks. Real estate stocks, for example, defended price gains because financing conditions became more favorable again when interest rates fell. This reduces costs and can stimulate demand on the housing market again. Vonovia shares, for example, climbed 7.8 percent in the Dax. Patrizia shares in the SDax even gained more than 16 percent.
However, Siemens Energy and Zalando topped the rally in the Dax with an increase of more than nine percent each. These two values are among the three biggest losers in the German leading index so far in 2023. They are also generally considered to be among the more interest-sensitive index members.
In contrast, a report by “Spiegel” about a possible sale of state shares weighed on two DAX stocks: Telekom’s stocks lost 3.6 percent and those of DHL lost 1.1 percent. According to the magazine, the federal government wants to use the sales to finance the restructuring of Deutsche Bahn.
Record for Dow Jones
The Eurozone leading index EuroStoxx 50 ultimately recorded an increase of 0.2 percent. At the country level, two stock exchanges had a positive impact: the Paris leading index Cac rose by 0.6 percent, and the London FTSE 100 even rose by 1.3 percent. The interest rate decision by the local central bank was also in focus there. The Dow Jones recorded its next record in New York. Most recently it increased by 0.3 percent.
The euro reacted positively to the ECB decision by recently reaching the $1.10 mark. The ECB had set the reference rate at 1.0919 (Wednesday: 1.0787) dollars.
On the bond market, the current yield fell from 2.24 percent the day before to 2.08 percent. In return, the Rex bond index rose by 0.84 percent to 127.89 points. The Bund future recently rose by just 0.02 percent to 136.36 points.
Source: Stern
