Frankfurt's stock exchange - Dax records higher earnings.
American consumer prices surprisingly dropped in May compared to the previous year, defying predictions of stagnation. There was also a steeper-than-anticipated reduction in the core annual rate of inflation, which excludes energy and food costs, which the US Federal Reserve closely monitors. This development brought hopes for potential interest rate decreases in the US.
As the stock markets closed for the day in Europe, investors were anxious to find out the anticipated interest rate decision from the Fed. Financial experts shared that it's highly unlikely for currency traders to initiate any drastic changes in monetary policy today. However, the trading community was curious to know if the new interest rate projections suggest just one or two rate cuts for 2022. Ulrich Wortberg, an economist at Helaba, noted this as one of the points of interest.
The stock indexes in Europe and the US experienced gains on the back of hopes for lower interest rates. The Eurozone's prominent index, EuroStoxx 50, surged 1.4% higher. The stock markets in Paris and London witnessed slightly lesser growth. The leading US index, Dow Jones Industrial, ended the European trading at 0.3% gain, while the Nasdaq 100, which consists of technology stocks that are highly sensitive to interest rates, rose by 1.5%.
The European Central Bank (ECB) anticipated a 1.0765 dollar exchange rate for the euro, but the euro reached 1.0843 US dollars following the US inflation data. In response, the US dollar cost 0.9289 euros.
On the bond market, the 10-year Bund's yield plummeted from 2.71% to 2.65%. The Rentenindex Rex rose by 0.51% to 124.01 points. The Bund future appreciated by 0.70%, reaching 131.19 tickers.
Meanwhile, German car manufacturers were affected by uncertainties surrounding a potential trade conflict with China along with negative signs sent by their supplier, Stabilus. The European Commission suggested significant provisional tariffs on Chinese electric vehicles, claiming that these manufacturers benefited from unfair subsidies. China, in turn, responded with possible counter-tariffs.
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- Despite the potential trade conflict with China, the Frankfurt Stock Exchange's main index, the DAX, still recorded higher earnings, with MDAX also showing positive trends.
- In contrast to the USA, which experienced a decrease in consumer prices, Germany saw an increase, as evidenced by the rising Bund yield and Rentenindex Rex.
- Investors in Frankfurt am Main's stock market were closely monitoring the interest rate decisions of both the Federal Reserve System in the USA and the European Central Bank (ECB).
- The technology stocks listed on the Frankfurt Stock Exchange, such as those in the MDAX, are sensitive to interest rate changes, as shown by the performance of the Nasdaq 100.
- The foodstuffs sector in Germany, like other industries, is affected by global economic trends, such as the potential trade conflict with China, which impacts companies like Stabilus, a major supplier to German car manufacturers.
