The Dax index lagged behind at the start of the week, closing at 20,133 points, a 0.4% decline from the previous trading day. Sartorius, Qiagen, and Porsche led the list of gainers shortly before the market close, while Vonovia, Henkel, and Brenntag trailed at the end.
According to Konstantin Oldenburger, a market analyst at CMC Market, the unexpectedly strong US labor market report on Friday still had an impact at the start of the new trading week. “Investors are starting to calculate the possibility that the Federal Reserve could hold its feet still this year in terms of interest rates” he said. This, at least, is indicated by the bond market, where yields are rising further. “As a result, fixed-income and thus risk-free bonds are increasingly becoming an alternative to an still highly valued stock market.”
The selling pressure on Wall Street did indeed spill over to the Dax in Frankfurt, but the index managed to stabilize above the 20,000-point mark after having corrected around 400 points from its highs of the previous week.
“Right now, investors are facing a dangerous mix of risk factors” Oldenburger said. “On the one hand, there is the monetary policy of the Fed and the rising bond yields, and on the other hand, the still uncertain trade policy and geopolitical provocations of a future US President Trump.” While the Republican’s election victory was celebrated with rising stock prices just two months ago, many investors now look anxiously into the future.
However, it is still too early to write off the monetary policy easing cycle of the Fed or to conjure up the “worst-case scenario” in terms of tariffs and Trump’s threats, the market expert emphasized. “The situation reminds me of the past year, when the market was still expecting seven interest rate cuts and then was severely disappointed in the middle of the year.” Currently, investors are only expecting a single interest rate cut and could thus be wrong again.
This time, however, the surprise potential for the stock market is to the upside, which could result in a continuation of the rally and new record highs. “Until the inauguration of Donald Trump on Monday and beyond, there will likely be uncertainty on the market, but at the latest by the first 100 days of his presidency, there should be more clarity on the most pressing issues and thus the direction for the stock market will be established” Oldenburger said.
The European common currency was weaker at midday on Monday: one euro cost 1.0203 US dollars, and one dollar was worth 0.9801 euros.
Meanwhile, the oil price rose significantly: a barrel of Brent crude from the North Sea cost $81.19 at around 5 pm German time, an increase of 1.8% from the previous trading day’s close.