"Hot phase of the stock market year" has begun

Since the beginning of November, the DAX has made significant progress and marked new highs. And the end of the road is far from over. With the last interest rate decisions of the year, the markets are facing a landmark week.

In the new week, all eyes on the stock markets will be on the last meetings of the world's most important central banks in the USA and Europe. Almost all market participants are betting on an extension of the interest rate pause by the US Federal Reserve and the European Central Bank (ECB) at the meetings on December 13 and 14. However, ears are pricked up - because it remains to be seen whether investors' latest rate cut fantasies will be confirmed or dashed.

"The past trading week was all about 'hoping for monetary policy'," write the experts at Helaba. The monetary authorities are trying to cool down the hot labor market and get inflation under control with higher interest rates. However, "stock market players can only live with the latest US job market report to a limited extent", comments Thomas Altmann, portfolio manager at asset manager QC Partners. Although the figures are not extremely strong, they are strong enough to postpone the expected first interest rate cut.

On the other hand, according to the experts at Capital Economics, the comparatively strong job growth is mainly due to cyclical jobs and people returning from strike. Without these special effects, the trend would remain as meagre as before - which would fit the picture of a further weakening economy in the fourth quarter. This reading would not stand in the way of hopes for interest rate cuts in the near future and could lead to further DAX records. In the end, "the hot and final phase of the stock market year" has begun with the US labor market report, wrote the experts at Index Radar.

"We are forecasting that the ECB will cut its key interest rate for the first time in April, while we do not expect the Fed to make its first interest rate cut until June," wrote chief economist Edgar Walk from Bankhaus Metzler. This is because he considers the economic situation in the eurozone to be weaker than in the USA. In addition, Walk expects core inflation in the eurozone to fall much faster than in the USA.

The stock market initially reacted calmly to the data. The German benchmark index advanced by two percent over the week to 16,690 points and even reached a new all-time high of 16,727 points. Since the beginning of November, the rally has now resulted in a gain of around twelve percent. It has even climbed as high as 16,783 points in trading.

"Premature presents"?

Several analysts are skeptical about the hopes of market participants. "The continuing price gains on the capital market feel like premature presents from Santa Claus," said Sascha Rehbein, portfolio manager at Weberbank in Berlin. However, the latest statements by ECB President Lagarde underlined the central bank's willingness to take further restrictive measures if necessary.

In view of the "remarkable" decline in inflation, the ECB can probably keep the door closed to further interest rate hikes for the time being, according to its Director Isabel Schnabel. "However, we would point out that the recent fall in inflation is far less remarkable at second glance," commented Mark Dowding, chief investor at asset manager BlueBay. In the previous year, the inflation rate was extraordinarily high due to the sharp rise in prices. The current figures therefore appear low in a year-on-year comparison. However, this effect will disappear in the coming months.

Lots of economic activity, few companies

By far the most important economic event for investors in the new week is therefore the announcement of the US inflation figures on Tuesday. According to experts, the inflation rate is likely to have fallen further in November. "However, volatile energy prices were probably the main reason for this this time, which is why there is likely to be only a limited sigh of relief," comments Commerzbank economist Christoph Balz. "The underlying inflationary pressure remains too high."

In the eurozone, investors are primarily waiting for the purchasing managers' indices for December, which are due at the end of the week. On average, experts expect an increase to 44.5 points from 44.2 points in November for industry. The indicator for the services sector is likely to advance to 49.0 from 48.7 points previously. However, both would still be below the threshold of 50 above which the sector is considered to be growing.

Another economic highlight will be the ZEW economic expectations on Tuesday. Most recently, the sentiment barometer of financial experts in Germany brightened for four months in a row, albeit at a very low level. In addition, numerous institutes are issuing their economic forecasts for 2024 towards the end of the year.

On the corporate side, however, a quiet week lies ahead. Medical technology manufacturer Carl Zeiss Meditec will publish its annual figures on Tuesday, followed by engineering services provider Bertrandt on Thursday. Otherwise, there will also be news from the fashion industry over the course of the week: Inditex will report its results for the first nine months of the current financial year and H&M will report its sales for the fourth quarter.