The German Dax index kicked off the trading day on a positive note on Friday, with the benchmark index calculated at around 20,740 points, a 0.4% increase from the previous day’s close.
According to Jochen Stanzl, chief market analyst at CMC Markets, “Despite very volatile interest rate expectations, the Dax is still soaring and investors feel at ease with the new record level of around 20,700 points.” The likelihood of a Fed interest rate cut in the second quarter now stands at 65% after Federal Reserve Governor Waller hinted at a potential cut in the event of positive inflation data. The central bank’s communication has been a wild ride for months and is likely to remain so, with the Fed not being tied down but still able to cut rates if the data develops accordingly.
The rally following the consumer price data this week had characteristics of a short squeeze, particularly in government bonds, where there were massive short selling positions prior to the data release. The fear of further price losses, especially in the 10-year sector where yields could have risen to five percent, was significant, and it was largely forced covering of short positions by those who had become too pessimistic.
The four largest US banks have reported strong annual results, which has raised hopes that the sector, hard hit by the crisis in regional banks, can once again become a performance driver for the S&P 500. Trump’s deregulation plans have added to the positive dynamics.
In Europe, Richemont presented strong quarterly results, and the Euro Stoxx 50 is just a few points away from a 24-year high. Investors are also flocking to European luxury stocks because the signals from China at least suggest a stabilization of growth in the country. The fact that Cartier & Co. performed well over the Christmas period is a bright spot for the industry after a challenging year in 2024.
Industrial production in China is continuing to decline, but a recovery, at least a gentle one, is now in sight, and there is little to stand in the way of an upswing in a few weeks. If it weren’t for Trump, who is threatening tariffs, the newly risen Euro Stoxx 50 and luxury stocks would have little to worry about, as Trump is a risk for the market, especially if he takes office on Monday, according to Stanzl.
The European single currency was slightly weaker on Friday morning, with one euro costing around 1.0290 US dollars, and one dollar being worth approximately 0.9718 euros.