The German stock index, the DAX, experienced a decline on Tuesday, closing at 24,060 points. This represents a decrease of 0.4% compared to the previous day’s closing value. The index initially showed a positive trend during the morning session but reversed course into negative territory in the afternoon.
Jochen Stanzl, Chief Market Analyst at CMC Markets, attributed the afternoon’s weakness to a subdued buying sentiment in New York, despite further easing of trade tensions between the US and China with the lifting of restrictions on Nvidia chip exports. He noted that German equities have, overall, maintained a surprisingly stable position in the face of potential US tariffs.
Stanzl explained that the current market reaction is driven by the processing of an inflation report that, for the first time, indicates that former President Trump’s trade policies are demonstrably impacting prices. He also highlighted the concurrent decline in prices for used vehicles and other goods, suggesting a possible economic slowdown and a trend towards stagflation – a scenario that is generally unwelcome to highly valued stock markets.
Concerns are also mounting regarding the likelihood of further interest rate hikes by the US Federal Reserve later this year. Market sentiment acknowledges a renewed uncertainty about monetary policy, partly fueled by the ongoing race to succeed current Fed Chair Powell. The apparent qualification for the position seems to involve publicly advocating for interest rate cuts, regardless of economic justification, potentially influenced by the US President’s preferences.
Throughout the trading day, shares of Brenntag led the gainers on the Frankfurt exchange, whilst Commerzbank and Rheinmetall shares performed as the weakest.
In related market news, natural gas prices decreased, with delivery for August now priced at €34 per megawatt-hour (MWh), a 3% reduction from the previous day. This translates to a potential consumer price of at least 8 to 10 cents per kilowatt-hour (kWh), inclusive of taxes and fees, if this price level is sustained.
Crude oil prices also fell, with Brent North Sea crude trading at $68.98 per barrel, a decrease of 23 cents or 0.3% compared to the end of the previous trading day.
The European currency weakened slightly, with the Euro trading at $1.1615 and the US Dollar subsequently costing €0.8610.