Status: 03/14/2023 9:39 p.m
Both Wall Street and Europe’s bourses ended trading with strong gains. But uncertainty about the state of the banking sector and future Fed monetary policy remains.
The Dow Jones ended trading up 1.1 percent to 32,155.40 points. The broader S&P 500 gained 1.7 percent to 3,920.02 points. The technology exchange Nasdaq 100 climbed 2.3 percent to 12,199.79 jobs.
On the one hand, the absence of further bad news in the banking crisis was supportive. But the eighth consecutive decline in US inflation and the associated hope that the US Federal Reserve would adopt a moderate monetary policy has brightened the mood somewhat.
In February, US consumer prices rose 6.0 percent year-on-year, the lowest increase since September 2021. “One less thing to worry about,” commented the market watchers at Index Radar. This reduces the pressure on the central bank to raise interest rates further.
Fighting inflation or financial market stability?
The future monetary policy of the Fed is of great importance for the markets: “Because of the current banking stress, the US central bank is in a quandary: fight inflation or financial market stability?” said analyst Bastian Hepperle from the private bank Hauck Aufhäuser Lampe. “The extent to which the Fed will raise interest rates on March 22 will not be known for the next few days either. If the situation remains tense, it looks like there will be a pause in interest rates.”
“Now, in the short term, the Fed must weigh up the need to raise interest rates in order to achieve its inflation target and the risks this may pose for fragile banks,” write Commerzbank’s experts. It is not yet possible to say with certainty how this estimate will turn out. “However, a large increase in interest rates is probably off the table, and even a small one has become uncertain,” say the experts.
More buoyant recovery on Europe’s stock markets
The DAX had previously closed 1.8 percent higher at 15,232.83 points. He has made up for part of yesterday’s price losses. Many investors in Germany are using the sharp fall in prices to stock up on shares again.
There were also solid price gains in Europe: the leading euro zone index, the EuroStoxx 50, was 2 percent higher at 4179.47 points. The Paris CAC 40 rose by 1.9 percent to 7141.57 points. The British FTSE 100 lagged behind this development with an increase of 1.2 percent to 7637.11 points. It was also held back somewhat by the relative weakness of the index heavyweights in the oil and commodities sectors.
Beginning of a new crisis?
But is the recovery on Europe’s stock exchanges sustainable? “While everyone is hoping that the turmoil that has rocked markets since Friday is over, I’m not sure that’s for sure and investors will continue to be very sensitive to current developments,” commented Craig Erlam from broker Oanda.
At the moment nobody knows whether the incident in the USA is limited to a few institutes or whether it is the beginning of a new crisis. The upcoming meetings of the European Central Bank and the US Federal Reserve are likely to become even more explosive, says portfolio manager Thomas Altmann from QC Partners.
It is to be expected that the ECB will consider the European banking system to be stable, wrote the Deutsche Bank experts. Nevertheless, there is a global financial shock, the extent and duration of which is uncertain.
Oil prices drop significantly
Unlike the European stock markets, there is no sign of a countermovement on the oil market. Aside from the Silicon Valley bank shockwaves, signs of a weaker-than-expected economic recovery in China also weighed on oil prices, said Leon Li, an analyst at CMC Markets.
The analysts at Commerzbank are also expecting major fluctuations on the energy markets in the coming days.
Bitcoin in demand again
The better mood in the financial markets today has also given a boost to many cryptocurrencies. Bitcoin, the oldest and best-known digital asset, rose by more than $2,000 from the previous day to around $26,500. This is the highest level since June last year. Other crypto assets such as Ether or XRP also increased significantly in value.
VW balance sheet displeases investors
The VW share is one of the biggest losers in the DAX. Even the hope fueled by CEO Oliver Blume for further IPOs by VW brands cannot persuade investors to buy. Jefferies analyst Philipe Houchois spoke of weak details from Wolfsburg in the final quarter of 2022. He primarily criticized the carmaker’s margins.
Banks are recovering
The Commerzbank share was listed significantly more firmly in the DAX, as were the shares of Deutsche Bank. Commerzbank papers fell by almost 13 percent yesterday. The shares of other European financial institutions such as BNP Paribas and Societe General in Paris, ING in Amsterdam and Banco BPM and UniCredit in Milan also recovered by up to 4.2 percent.
Fraport achieves a surprisingly high profit
The Frankfurt airport operator Fraport earned more than expected last year thanks to the recovery of air traffic from the Corona crisis. Consolidated earnings soared by 82 percent to almost EUR 167 million, exceeding analysts’ expectations, which had averaged EUR 100 million.
Facebook parent Meta wants to lay off another 10,000 employees
The Facebook and Instagram parent company Meta wants to lay off another 10,000 employees. CEO Mark Zuckerberg said the layoffs will affect middle management. In addition, 5,000 vacancies at Meta should not be filled. In November, the Internet giant announced that 11,000 employees would be laid off.
Boeing falls behind again in aircraft deliveries
The US aircraft manufacturer Boeing has fallen behind again in its deliveries. 28 passenger and cargo jets were delivered in February, significantly fewer than the 38 in January. The world’s largest aircraft manufacturer Airbus from Europe had delivered 46 machines in February, but only had 20 copies in January. This puts both companies at 66 jets after the first two months of the year.