Market report: Fed signals push the DAX deeper into the red

market report

As of: September 21, 2023 12:42 p.m

The prospect of a further interest rate hike by the US Federal Reserve this year is creating a bad mood among investors. The DAX fell to a new weekly low at lunchtime.

After the US Federal Reserve’s interest rate signals have already led to price losses on Wall Street and the Asian stock exchanges, they are also causing little optimism on the Frankfurt stock market. As expected, the Fed left the key interest rate unchanged at the highest level in more than twenty years, but did not fundamentally change its monetary policy strategy.

According to experts, the monetary authorities’ forecasts foresee a further increase for the current year. “Anyone who relied on a clear change of course was wrong,” comments chief economist Thomas Gitzel from VP Bank. “The US Federal Reserve remains true to itself.” She didn’t give the impression that she was now going to put her hands on her back.

In addition, interest rates could remain higher in 2024 than previously hoped. Expectations of an imminent interest rate cut have been dampened, says capital market strategist Jürgen Molnar from Robomarkets. “Higher for longer” is the painful summary of the Fed’s message.

This creates a bad mood among investors on the stock market. “The prospect of key interest rates barely falling in 2024 is now being priced into the prices,” says Thomas Altmann from QC Partners. “The markets have to come to terms with the fact that interest rates could remain at current levels for longer than previously expected.”

Yesterday, the DAX rose continuously after two days of losses in a row and closed 0.75 percent higher. Today, however, the leading index fell by around 1.14 percent at midday – to a new weekly low of 15,602 points. Nevertheless, it remains in the fairly narrow trading range between 15,500 and around 16,000 points, in which it has been for weeks.

Investors on the Asian stock markets also reacted disgruntled today. Fed Chairman Jerome Powell’s statements have opened the door for a wave of selling, says Redmond Wong of Saxo Markets. The Japanese Nikkei index lost up to 1.4 percent to 32,550 points, the broader Topix temporarily fell one percent.

In China, the Shanghai Composite fell 0.7 percent, and the index of the most important companies in Shanghai and Shenzhen lost 0.6 percent. The fear of continued economic weakness also remained an issue on the Chinese stock market.

The results of yesterday’s Fed meeting were also not well received on Wall Street: the Dow Jones gradually lost its daily gain after the interest rate decision and ultimately traded 0.22 percent lower.

In addition, technology stocks on the Nasdaq technology exchange plummeted. Because of their usually higher growth dynamics and debt ratios, technology companies are particularly sensitive to interest rates. The Nasdaq 100 lost 1.46 percent.

After the US Federal Reserve Bank, other central banks in the Western world have made monetary policy decisions. The central banks are likely to have reached the interest rate peak soon, but the door for further tightening remains open. The Swiss National Bank (SNB) has not raised its interest rates any further, but the Swedish and Norwegian central banks have. The European Central Bank (ECB) also increased its key interest rate by a further 0.25 percent last week. Further increases have not been ruled out everywhere.

The euro continues to weaken this morning and is falling slightly. At $1.0617, the common currency reached its lowest level since March overnight. In the morning the price was only slightly higher. The euro was weighed down by the stronger dollar as a result of interest rate forecasts.

Oil prices fell further at high levels in early trading. At midday, a barrel (159 liters) of North Sea Brent for delivery in November cost 92.70 US dollars. That was 78 cents less than the evening before. The price of a barrel of American West Texas Intermediate (WTI) fell 76 cents to $88.90.

This week, oil prices reached their highest levels in ten months. The Brent price had risen to more than $95. The main reason is the tight supply from large producing countries such as Saudi Arabia and Russia. In addition, demand from large countries such as the USA and China has so far been robust.

German exports outside the EU fell for the second month in a row in August due to lower demand from the US and China. Exports of goods to these so-called third countries fell by 1.7 percent compared to the previous month to 58.4 billion euros, as the Federal Statistical Office announced. In July there was even a minus of 2.3 percent. Higher interest rates, expensive energy and a weak global economy are currently making export business more difficult.

Bayer is facing another lawsuit in the USA over alleged long-term consequences of the chemical PCB, which has been banned for decades. The city of Chicago is suing Bayer, among others, over alleged PCB chemical pollution of water, air and soil, according to court documents filed Wednesday. Bayer rejects the allegations. “Monsanto believes the case is without merit because the company has never manufactured or disposed of PCBs in or near the Chicago metropolitan area,” the DAX group said. “Furthermore, the products alleged to be the source of environmental impacts were manufactured by third parties and not by Monsanto.”

Meanwhile, Bayer is investing 250 million euros in a new contraceptive production facility in Finland. The new plant in Turku is intended to expand production capacities for implants and hormonal coils for contraception, the pharmaceutical and agricultural group said. Bayer is also building a new production facility for long-term contraceptives in Costa Rica. Both projects are part of the total investment of over 400 million euros announced in 2021 for new production capacities for the production of contraceptives.

The Austrian furniture giant XXXLutz has taken the Berlin online furniture retailer off the stock exchange after taking over Home24. The Frankfurt Stock Exchange has approved the application to revoke Home24’s listing, XXXLutz reported. The so-called delisting became effective at the end of September 14th. Since then, Home24 shares can no longer be traded on the regulated market of the Frankfurt Stock Exchange.

The Nike Air Force 1 sneaker and the Adidas Gazelle and Samba shoe models have turned out to be bestsellers for the British sports fashion retailer JD Sports. This gave the board confidence that it would achieve a pre-tax profit of 1.04 billion pounds in the financial year ending in January, as the company announced. That would be an increase of five percent compared to the previous year. Driven by flourishing business in Europe and the USA, where revenues increased by 27 and 15 percent respectively, consolidated sales rose by twelve percent in the first half of the year.

The energy company RWE is pushing ahead with its plans to build a large battery storage facility in the Netherlands. The company announced that it had made an investment decision for the project on the site of its Eemshaven biomass power plant. 110 cabinets with lithium-ion batteries are to be installed there on an area of ​​around 3,000 square meters. The battery storage system is intended to absorb excess energy from the power grid and feed it back in when needed to keep the grid stable. The plant will have an installed capacity of 35 megawatts (MW). RWE puts the costs at around 24 million euros.

The plant manufacturer Gea is getting a new CFO, Bernd Brinker, on an interim basis. Brinker will take over the office on October 16 for one year, as the MDAX group announced. Brinker previously worked, among other things, as CFO at the door technology and security specialist Dormakaba. The position of CFO was vacant after former CFO Marcus Ketter died unexpectedly in August.

After several postponements, the trial surrounding a model declaratory action brought by consumer advocates against Mercedes-Benz will continue. The appointment at 10 a.m. is the first meeting since the negotiations began in July 2022. The reason for the postponements were fundamental decisions of the European Court of Justice (ECJ) and the Federal Court of Justice (BGH), which the court initially wanted to wait for. Today it will be examined what effects the new case law has on the procedure, as a spokesman for the Higher Regional Court announced in advance.

The logistics group DHL criticizes the rejection of the desired postage increase for the post office. “We cannot understand how this decision could be made,” said DHL CEO Tobias Meyer to the “Süddeutsche Zeitung”. Inflation is higher than planned, costs have risen dramatically and profits have fallen. “The question arises: Do the regulators and politicians actually want us to continue to operate the mail business and invest here?”

The scandal-ridden Japanese technology group Toshiba has come one step closer to being taken over by the financial investor JIP for the equivalent of 14 billion euros. A consortium led by private equity firm Japan Industrial Partners (JIP) has acquired 78.65 percent of the company through a takeover offer, Toshiba said.

The logistics group Fedex lost sales in the last quarter, but generated more profit. The bottom line is that the Postal competitor earned $1.08 billion after $875 million a year earlier. Meanwhile, sales fell by around six percent to 21.7 billion dollars (20.4 billion euros), as FedEX announced after the US stock market closed. Cost reductions and higher prices contributed to the improved profitability. FedEx had initiated a restructuring that should save around six billion dollars.

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