German equities experienced a downturn on Monday, reversing an initially cautious positive start to the trading day. Shortly after 9:30 AM, the DAX index registered at 24,285 points, a decrease of 0.4 percent from its closing level on Friday.
This shift occurred despite earlier analyst predictions of a bullish market trajectory, fuelled by substantial gains in Asian markets and anticipation of potential interest rate reductions. Jochen Stanzl of CMC Markets noted a prevailing sentiment that the ongoing US government shutdown could increase the likelihood of two interest rate cuts before the year’s end, framing current economic news as potentially beneficial. While forthcoming private economic data suggesting weakness in the US labor market are being observed, they haven’t signaled significant recession risks, a dynamic that the market seems willing to accept given the potential for further Federal Reserve action.
Analysts caution that the duration of the US shutdown carries considerable risk and that a point will eventually arrive when the market will express its displeasure. However, that threshold hasn’t yet been reached.
The Nikkei index in Tokyo saw a near five percent increase, driven by anticipated market-friendly policy changes attracting international investors seeking alternatives to the high valuations seen on Wall Street. Sanae Takaichi’s policies are generating optimism; a sentiment reminiscent of the initial enthusiasm surrounding former Prime Minister Shinzō Abe’s “Abenomics” initiatives. However, experts also acknowledge that early excitement for Abe’s policies eventually cooled, prompting hope that Takaichi can achieve more sustained economic stimulus.
The euro weakened on Monday morning, trading at $1.1678, equivalent to $0.8563 per dollar.