The German DAX index experienced a significant rebound on Thursday, closing at 24,200 points – a 1.0% increase compared to the previous day’s close. The surge followed a morning trading session that mirrored the previous day’s levels, with a steady upward trajectory throughout.
The European Central Bank’s decision to maintain current interest rates, widely anticipated by market participants, elicited a muted response. “There was virtually no surprise regarding the ECB’s inaction” commented Christine Romar, Head of Europe at CMC Markets. “The real catalyst was the unexpectedly lower US inflation data released concurrently”. The Consumer Price Index for November showed an increase of only 2.7%, a slight decrease from the expected 3.0%, while the core rate registered at 2.6%.
However, Romar cautioned about the potential for inaccuracies in the published data, citing the US government shutdown. “The data collection processes were compromised due to the shutdown during crucial months, leading to incomplete surveys in certain sectors. A clearer picture of the underlying inflation trend in the US is unlikely to emerge until the December and January figures are available. Nevertheless, this unexpected moderation provided a welcome boost to sentiment on Wall Street, suggesting a potential break in the recent multi-day losing streak.
Trading in Frankfurt was dominated by Siemens Energy and Deutsche Bank, which topped the performance charts. Conversely, Mercedes-Benz, BMW, Merck, BASF and Beiersdorf concluded the day at the lower end of the list.
Adding complexity to the economic landscape, natural gas prices rose to €27 per megawatt-hour (MWh) for delivery in January, representing a 1% increase from the previous day. This price level implies a consumer price of at least 7-9 cents per kilowatt-hour (kWh), incorporating taxes and additional costs, should the upward trend prove sustained. Escalating energy costs pose a continued threat to households and businesses across Europe, potentially dampening the positive effects of the DAX’s recovery.
The price of Brent crude oil also registered an increase, reaching $60.09 a barrel – a 0.7% increase compared to the previous trading day’s close. The simultaneous rise in gas and oil prices highlights the ongoing volatility in global energy markets and their potential to undermine broader economic stability.
The euro also strengthened slightly, trading at $1.1742, with the dollar fetching €0.8516. While this brief strengthening offers a marginal reprieve, the currency’s volatility continues to be a key factor influencing investor confidence and the overall health of the Eurozone economy.