Status: 09/22/2022 07:59 a.m
The US Federal Reserve has raised the key interest rate by 0.75 percent for the third time in a row – and could thus cause a price slide on the Frankfurt stock market. The DAX lost its feathers today.
After the third major interest rate hike in a row by the US Federal Reserve and in anticipation of further interest rate decisions in Europe, the DAX is facing significant losses at the start of trading today. The broker IG estimates the leading German index around two percent lower at 12,509 points before XETRA starts. In the evening, the Fed continued its series of large interest rate hikes and raised the key interest rate again by 0.75 percentage points – to the new range of 3.00 to 3.25 percent and thus to the highest level in 14 years.
DAX closed in positive territory
The move is intended to counter rampant inflation, which is historically high in the US. With the strict monetary policy, however, there is a growing risk that the central bank will soon slow down the economy so much that the job market and the economy are stalled.
This can also be felt on the German stock market. With the new losses, the DAX is threatened with another test of the round mark of 12,500 points, which already served as support in July and March. For a short time, it fell below an annual low of 12,390 points, which is now coming to the fore again.
Before yesterday’s Fed meeting, the leading index was up around 0.8 percent despite Russia’s partial mobilization, which is fueling concerns about a new escalation of the Ukraine war and a recession in Europe.
On Wall Street, the most important indices had fallen to new lows since July due to the next sharp increase in interest rates. After ups and downs in prices, the Dow Jones lost 1.70 percent to 30,183 points. In late trading, the pressure to sell increased, and the leading index fell to its lowest level in more than two months. The market-wide S&P 500 fell 1.71 percent, the technology index Nasdaq 100 lost 1.8 percent.
“I wish there was a painless way,” said Fed Chair Jerome Powell. “There isn’t one.” Investors were more and more concerned about a “hard landing,” according to Credit Suisse. Current data on the forecast future interest rates (“Fed dot plots”) in particular attracted attention, which, with an interest rate high of 4.6 percent in 2023, was above market expectations.
British and Swiss central banks at a glance
Today, further interest rate decisions are in the focus of investors. The British central bank (BoE) is likely to raise the key interest rate unusually sharply. Stockbrokers expect an increase in the key monetary policy rate by 0.75 percentage points to 2.5 percent. The Swiss National Bank (SNB) also decides on a possible interest rate adjustment. Analysts assume that the monetary authorities will raise the key interest rate by at least 0.5 percentage points, if not by 0.75 percentage points.
Bucking the global trend, Japan’s central bank stuck to its low interest rate policy. After a two-day meeting, the monetary authorities decided to leave their most important monetary policy levers unchanged. Short-term interest rates are to remain at minus 0.1 percent and long-term rates at around zero. The yen continued to depreciate against the dollar in response to the decisions. The three central bank meetings are pushing the upcoming economic data into the background today. This is how the barometer for consumer confidence in the euro zone is published.
There is also no tailwind for the stock exchanges from Asia today. The stock markets also lost ground after the US Federal Reserve’s decision the previous evening. In Tokyo, the leading Japanese index Nikkei 225 fell by around half a percent in late trading. In Shanghai, the CSI 300 index, which includes the 300 most important companies on the Chinese mainland stock exchanges, lost almost one percent. The stock market in the Chinese special administrative region of Hong Kong went down even more. There, the leading index Hang Seng lost almost two percent in afternoon trading there.
The soaring of the world reserve currency continues. The dollar index, which reflects the exchange rate against major currencies, is up 0.3 percent today and is trading at 111.79 points, the highest it was a little over 20 years ago. “What else can you buy right now but the dollar,” asks Sally Auld, chief investor at wealth manager JB Were. “The Fed will not stop raising interest rates anytime soon.” Other stockbrokers also point to the attractiveness of the dollar as a “safe investment haven” against the background of the looming recession in Europe, the weakening Chinese economy and the ongoing war in Ukraine.
On the other hand, the euro remains under pressure. Overnight, the common currency fell as low as $0.9809, its lowest level in about 20 years. The European Central Bank (ECB) set the reference rate a little higher yesterday at $0.9906.
In the fight against dead spots, a cooperation between the three major German mobile phone providers is making progress. The network operator Telefónica (O2) announced today that 200 of Deutsche Telekom’s own locations had been activated and in return had access to the same number of locations of the Bonn group. By the end of the year, the two network operators want to let each other on the network at up to 700 locations. These are so-called gray spots, where only one or two networks are available and not all three. Anyone who has a contract with the provider who is not present there is in a dead zone.