German Stock Market Index Underperforms, Investors Eye Fiscal Package Details
The Dax, Germany’s major stock market index, closed with a loss on Wednesday, settling at 23,288 points, a decline of 0.4 percent from the previous day’s close. The index started the day cautiously, but later recovered some of its losses, only to return to its morning level.
According to Jochen Stanzl, chief market analyst at CMC Markets, investors are currently fixated on the potential for Rheinmetall, a German defense company, to benefit from the government’s fiscal package. “It’s a bit exaggerated to say that if a company, no matter how small, produces drinking cups for the German military, its stock could double in the coming weeks” Stanzl said. However, he also warned that many investors will likely be disappointed, as the details of the fiscal package are still unclear. “Investors are searching for the fine print of the package and speculation is running high on stocks that could potentially benefit, but there is a corresponding risk if the high expectations are not met” Stanzl added.
The Federal Reserve is set to make a decision on interest rates in the evening, with market analysts expecting the central bank to delay any rate cuts in the face of uncertainty surrounding the impact of the Trump administration’s trade policies on inflation and growth. “The Fed will try to buy time to study the effects of the trade policies more closely” Stanzl predicted. “More than in recent months, Jerome Powell, the Fed chairman, will likely put off making a clear monetary policy decision, as the political uncertainty is too great and investor expectations for future rate cuts are too volatile to be pinned down.”
Heidelberg Materials, Zalando and Siemens Energy were the top gainers in Frankfurt, while Rheinmetall’s shares closed at the bottom of the list.
Meanwhile, the gas price rose, with a megawatt-hour of gas for April delivery costing 43 euros, a 7 percent increase from the previous day. This implies a minimum consumer price of at least 9 to 11 cents per kilowatt-hour, including additional costs and taxes, if the price remains stable.
The oil price also increased, with a barrel of Brent crude selling for 70.85 US dollars, a 29-cent or 0.4 percent gain from the previous day’s close.
The European common currency was weaker, with one euro exchanging for 1.0883 US dollars and one US dollar worth 0.9189 euros.