Dusseldorf After the interest rate hike by the US Federal Reserve (Fed), investors on the German stock market withdrew: The Dax was two percent lower on Thursday morning at 13,219 points. Analyst Tina Teng from broker CMC Markets explains the minus as follows: “The high level of economic uncertainty remains in view of the deterioration in growth prospects.”
After six trading days with some heavy losses, the leading German index was up 1.4 percent on Wednesday at 13,485 points. After an extraordinary meeting, the European Central Bank (ECB) announced a remedy for possible euro crises. The meeting did not yet bring any details, but it did give a work order to the “relevant bodies”.
On Wednesday evening, the monetary watchdogs in the USA decided on the largest interest rate hike since 1994: They raised the key interest rate by 75 basis points to a range between 1.5 percent and 1.75 percent. According to Thomas Altmann, portfolio manager at investment advisor QC Partners, the central bank’s decision leaves no doubt that combating inflation is the top priority.
The inflation rate rose to 8.6 percent in the US in May – the highest level since December 1981. The Fed sees price stability with a long-term inflation rate of two percent. According to Altmann, the central bank has committed itself to this goal with its statement. “Fighting inflation is clearly taking priority over stimulating the economy and supporting markets right now.”
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Investors on Wall Street had already priced in the rate hike. The US stock exchanges closed more firmly on Wednesday, the technology-heavy Nasdaq index was temporarily up about three percent.
The Asian stock exchanges initially turned positive, but were inconsistent in the further course of trading. In Tokyo, the Nikkei index rose 0.4 percent to 26,431 points on Thursday. The broader Topix index rose 0.6 percent. In China, the Shanghai Stock Exchange was down 0.5 percent.
This Thursday, investors will turn their attention to the Bank of England (BoE) meeting. Investment strategist Michael Hewson of brokerage house CMC Markets predicts that the central bank is likely to raise the key rate by a quarter of a percentage point.
“That’s significantly less than would be necessary.” Because the devaluation of the pound sterling has nullified the inflation-dampening effect of the interest rate hikes of the past few months because they make imported goods more expensive. Sterling was down 0.4 percent this morning at $1.2130.
Oil prices are increasing
The euro holds above the $1.04 mark in early trade on Thursday. In the morning, the common currency costs $1.0435, about the same as late the previous evening. The European Central Bank (ECB) had set the reference rate at $1.0431 on Wednesday afternoon.
Oil prices rose slightly on Thursday. A barrel (159 litres) of North Sea Brent in the morning costs 118.91 US dollars. That’s 40 cents more than the day before. The price of a barrel of the US West Texas Intermediate (WTI) variety rose by 60 cents to $115.91.
Look at the individual values
Zalando: On the German stock market, papers from the online fashion retailer are down more than ten percent. British rival Boohoo lost sales after the end of the corona lockdown. A profit warning from Asos also weighed on the sector.
Nordex: Investors are punishing the wind turbine manufacturer: the share price is about one percent lower. Nordex has to leave the SDax and TecDax because of violations of criteria such as timely quarterly reports, as Deutsche Börse has now announced.
SM Solar: As a TecDax climber, the solar technology group is in demand after an unscheduled index decision by Deutsche Börse. The stock gains 3.5 percent and is one of the winners in the SDax.
Asos: A profit warning sent the British online fashion retailer’s shares plummeting. The papers collapse by up to 18.8 percent to 942 pence and are listed weaker than they have been for almost twelve years. The inflationary pressure is increasingly affecting the purchasing behavior of customers, which is why the forecasts cannot be kept, the company said. Adjusted pre-tax profit of £20m to £60m is now expected for the fiscal year ending in August, compared to an average of £83m previously estimated by analysts.
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