Stock market on the upswing - Dax reaches new record high
Driven by the prospect of key interest rates possibly falling again soon, the Dax broke its four-month-old record on Tuesday. The leading index climbed 0.88% to 16,548.69 points, surpassing the record set at the end of July, which was just under 16,529 points. The year-end rally thus continues.
In November alone, the Dax gained 9.5 percent in value. Starting from the interim low in October, which at 14,630 points was close to the low for the year in March, it has now gained around 13%.
The most important reason to buy in recent weeks has been the hope that the European Central Bank and the US Federal Reserve are through with their interest rate hikes and will start cutting rates next year. Investors are hoping that falling interest rates will provide a tailwind for the economy after inflationary pressure has recently eased noticeably. As excessive inflation is harmful to the economy, the central bank has had to counteract this by raising key interest rates.
Stock market hopes for further signal from the USA
The markets are now pricing in interest rate cuts in the spring. Just before the weekend, a speech by US Federal Reserve Chairman Jerome Powell gave investors' interest rate expectations a further boost. Although he reiterated his willingness to raise interest rates further if necessary, he also said that monetary policy was already quite restrictive.
"At the moment, everything simply fits together for equities, and the Fed chief did not sound strict enough on Friday to really put a stop to the current euphoria," explained analyst Jochen Stanzl from broker CMC Markets.
Against this backdrop, US labor market data on Friday will be important. This is because the development of the labor market plays a major role for the Fed's monetary policy as an indicator of the strength of the economy, but also for inflationary pressure.
Dax outperforms the Dow Jones
Capital market expert Sebastian Dörr said of the year-end rally: "It puts the icing on the cake for good stock market years, but at least it gives bad ones a good ending." In 2023, the former is probably the case: so far this year, the Dax has gained almost 19 percent, slightly more than the European EuroStoxx index. In a global comparison, it clearly outperforms the leading US index Dow Jones, but not the tech exchange Nasdaq.
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The ECB's potential shift from interest rate hikes to cuts in 2023, as suggested by recent market sentiments, could positively impact the Dax, given the central bank's role in managing inflation. Consequently, the US Central Bank, or the Fed, also holds significant influence over global markets, as evidenced by their interest rate cuts being closely watched by investors. Following Jerome Powell's recent speech, markets are now anticipating rate cuts in the spring, boosting investor confidence and fueling the continuation of the Dax's record-breaking rise, having already surpassed its previous high in July. [Record high] [Dax] [US Central Bank] [Ezbi] [Inflation]
Source: www.stern.de
