DAX Falls Below 20,000 as Investors React to Fed Decision
On Thursday, the DAX index fell sharply, closing below the 20,000 mark. At the Xetra closing, the index was calculated at 19,970 points, a decline of 1.4% compared to the previous day’s close.
Only a few stocks managed to gain in the day’s trading, including Covestro, Rheinmetall, and Henkel. The largest declines were seen in the papers of Infineon, Vonovia, and Heidelberg Materials shortly before the closing bell.
The poor market sentiment is likely due to the Fed’s decision the previous day and the subsequent reaction of US markets. “Just three months after the start of the interest rate cut cycle, the US Federal Reserve has taken away the hopes of further monetary easing yesterday” said Konstantin Oldenburger, a market analyst at CMC Markets. “The expected number of cuts in the coming year has shrunk from seven to four and now to two. This change in the direction of interest rates is unsettling investors around the world” he added.
However, the way central banks intend to act is exactly what they are doing. Both the European Central Bank and the Federal Reserve will continue to lower interest rates gradually, but always with the undertone and the threat of being able to pause at any time. “That’s exactly what happened yesterday. Not more, but not less” the market expert said.
“This is why the rally potential in the DAX, but also on Wall Street, may not be fully exhausted yet.” If the fog clears and the large decline of Friday is behind investors, they could reinterpret yesterday’s statements and again boldly invest in stocks in a potential Christmas rally in the last seven trading days of the year.
The euro was stronger on Thursday afternoon, with one euro costing 1.0377 US dollars and one dollar being worth 0.9637 euros.
Meanwhile, the oil price fell, with a barrel of North Sea Brent crude costing $72.73 at around 5 pm German time, a decline of 66 cents or 0.9% from the previous day’s close.