The Dax index started the trading day on Friday in a negative direction. By 9:30 am, the leading index was calculated at around 19,955 points, 0.4% below the previous day’s closing level.
“The Dax is still searching in vain for convincing buyers to push the index sustainably above the 20,000 mark” said Jochen Stanzl, chief market analyst at CMC Markets. “The upcoming assumption of office by Donald Trump will put the resolve of investors to the test.”
“This is also reflected in the foreign exchange markets. The euro is approaching the parity with the US dollar at a rapid pace. While this may support the Dax, as its companies rely on exports to foreign markets, the depreciation of the euro is also a symptom of the looming trade war that Trump could spark.”
Historically, protectionism has been associated with higher volatility in the stock markets and higher returns. “The new president will likely keep a close eye on these two parameters. The strong decline of the Dow Jones in recent years and returns of over 4.5% in the last decade are a clear indication that the Wall Street is not interested in abrupt changes in trade policies with foreign countries.”
“The US Federal Reserve has also signaled its disapproval of Trump’s economic policies with a sharp correction just before Christmas. The financial world is prepared for Donald Trump. Now, everyone is just waiting for the first steps of the new president” Stanzl said.
The European common currency was slightly stronger on Friday morning: one euro cost 1.0284 US dollars, and one dollar was worth 0.9724 euros.