The Dax started weakly in the trading day on Thursday morning. By 9:30 am, the leading index was calculated at around 20,065 points, 0.9% below the previous day’s close.
“The Fed’s interest rate decision yesterday has had a lasting impact on the market” said Thomas Altmann of QC Partners. “The Christmas rally has come to an abrupt end. Euphoria has given way to despair.”
“The expectation of lower interest rates was a major driver of the recent rally. And this driving force is now largely gone.”
The Dow Jones had ended the 10th consecutive day in the red on Wednesday, approaching its record of 12 consecutive losing days in a row. The last time this happened was in 1974. “From a technical perspective, the Dow Jones is massively oversold.”
“The US is heading towards a government shutdown, and it’s possible that it will persist until Donald Trump takes office.”
For the Dax, the mark of 20,000 points is now in focus. And 20,000 is important in multiple ways. “First, 20,000 is psychologically as important as no other mark. Second, 20,000 is crucial for the next options expiration date. Almost 15,000 options with a base price of 20,000 points will expire tomorrow. Whether the Dax is above or below this mark will decide who profited from these trades.”
Meanwhile, the Bank of Japan has left its interest rate unchanged as expected. “Now, the Japanese monetary authorities can wait and see how Donald Trump’s policies will affect the Japanese economy and the yen exchange rate” said Altmann.
The European common currency was stronger in the morning: one euro cost 1.0402 US dollars, and one dollar was worth 0.9614 euros.