The German DAX index experienced a decline on Tuesday, closing at 24,077 points – a 0.6% decrease from the previous day’s close. The index’s performance reflected a broader sense of economic uncertainty, particularly regarding Germany’s trajectory heading into the new year.
Analysts pointed to recently released Purchasing Managers’ Indices (PMIs) as a primary driver of the downturn. Christine Romar, Head of Europe at CMC Markets, remarked that the current economic sentiment mirrors the conditions at the beginning of the year, highlighting a disappointment in the policy shifts anticipated following the change in government in Berlin. “The initial optimism sparked during the late spring has failed to materialize” Romar stated, suggesting that this expectation will likely carry over into 2024.
The subdued performance wasn’t limited to Germany. Romar also scrutinized US employment data, noting a significant slowdown in job creation. The delayed release of figures, compounded by revisions of previous months’ data, revealed “a veritable braking of the job engine” in the American economy. While markets in New York demonstrated a capacity to recover from pre-market losses in anticipation of continued monetary intervention, Romar’s assessment underscores existing concerns about global economic resilience.
Within the German market, Zalando shares led the upward movement for a significant portion of the trading day, followed by Merck, GEA and Henkel. Fresenius and Bayer, conversely, trailed at the lower end of the performance spectrum, signaling uneven sectoral performance.
The downward trend extended to commodity markets. Natural gas prices saw a decrease, reaching €27 per megawatt-hour (MWh) for delivery in January – a 2% drop from the previous day. This price level suggests consumer prices of approximately 7-9 cents per kilowatt-hour (kWh) including taxes and levies if sustained. Simultaneously, a significant drop was observed in the price of Brent crude oil, falling to $58.94 a barrel, representing a 2.7% reduction.
The euro strengthened slightly against the dollar, trading at $1.1764, with the dollar fetching €0.8501. This marginal strengthening, however, offers limited reassurance in the face of broader macroeconomic anxieties and raises questions about the sustainability of this trend amid prevailing global economic headwinds. The market’s sensitivity to anticipated policy responses underscores a vulnerable economic environment increasingly reliant on external support.