Financial Markets Experience Mixed Reactions as ECB and US-China Trade Talks Influence Indices
The German Dax index closed Thursday with a 0.2% gain, reaching 24,324 points at the Xetra trading close. The index had earlier touched a new record high of 24,479 points at 2:49 pm, before declining and briefly entering negative territory.
Market analysts attributed the move to the European Central Bank’s (ECB) decision to cut the deposit rate to 2.0%, a move that was expected but still had an impact on the markets. “It’s come as expected: the ECB has halved the interest rate within a year” said Jochen Stanzl, chief market analyst at CMC Markets. “However, the central bank has also signaled the end of this cycle and a further rate cut would require a strong justification.”
The ECB’s decision, however, was overshadowed by US President Donald Trump’s phone call with Chinese counterpart Xi Jinping, aimed at reviving stalled trade talks and the possibility of a new round of tariffs. This development had a more significant impact on the markets, with the Dax index not rising as much as expected due to the uncertainty surrounding the trade talks.
From a seasonal perspective, the analyst noted that the Dax index typically reaches its high point in the first half of June, before declining until early October. This could be a concern for investors, as the current rally may be due for a correction.
In Frankfurt, shares of Bayer, Heidelberg Materials, Commerzbank and Rheinmetall led the gains, while Airbus shares lagged behind.
Meanwhile, the natural gas price rose, with a megawatt-hour of gas for delivery in July costing 36 euros, a 2% increase from the previous day. This could translate to a consumer price of at least 8 to 10 cents per kilowatt-hour, including additional costs and taxes, if the price remains at this level.
Oil prices also surged, with a barrel of Brent crude costing 65.57 US dollars, a 1.1% increase from the previous day’s close.
The euro was stronger, trading at 1.1452 US dollars, while the US dollar was valued at 0.8732 euros.