A cold shower for investors: After the previous day’s rally, which was driven by interest rate hopes, the German stock market collapsed on Thursday. Disappointment has spread with regard to the US Federal Reserve’s stance, and hopes of several interest rate cuts this year are evaporating. The Dax lost 1.96 percent to 18,265.68 points, falling to its lowest level since the beginning of May. The MDax of medium-sized stocks fell by 2.61 percent and closed at 26,075.11 points.
On Wednesday afternoon, US consumer prices, which had risen less than expected in May, had driven up the stock markets. In the evening, however, the US Federal Reserve indicated that it was in no hurry to cut interest rates. It only indicated one interest rate cut for the current year – a departure from the three interest rate hikes previously forecast. Everyone agreed that the further course of action would depend on the data, said Fed Chairman Jerome Powell.
Analyst Eric Winograd from the investment firm AllianceBernstein spoke of a “monetary policy on hold”. He does not expect a significant drop in inflation in the USA. “I still assume that the Fed will only cut interest rates once this year” – and that will probably not be until December.
Source: Stern
