Market Report
Stock market investors pulled back somewhat ahead of Wednesday’s important Federal Reserve meeting. The DAX, which had been rising for three straight days, closed in the red once again.
No more risks until the Fed meeting in two days: Uncertainty over the level of US interest rate hikes and the absence of a stimulus package led stock market investors to take profits from the previous week today. The DAX therefore weakened somewhat after its recent rally, closing down almost 0.4% at 18,633 points.
On Friday, Germany’s main index closed another successful week with additional price gains, rising 0.98% to 18,699 points. The weekly gain was around 2% after three consecutive days of strong trading. “Last week was very good for the stock market. The big question now is what happens next,” said Thomas Altmann, portfolio manager at QC Partners.
The most important variable in the stock market this week is the Fed’s interest rate meeting. “A proper monetary policy decision from Washington on Wednesday could re-energize the push for record highs. At the same time, investors are buying stocks because the likelihood of a U.S. recession remains low,” says Jochen Stanzl, chief analyst at broker CMC Markets.
The market is expecting the Fed to cut rates for the first time in four years. There are clear signs from the monetary authorities that this is the case. But they have so far left the scope and order of future rate hikes open. They want to wait for further developments in economic data to guide their decision. “Whether 25 or 50 basis points on Wednesday is the big question this week,” said Jurgen Molnar of brokerage RoboMarkets. “The odds feel 50-50 when it comes to pricing in the bond and futures markets. So one group has to disappoint the Fed, and they will, and the Fed has to change its position after the decision.”
According to experts, both options can be accepted on both the positive and negative sides. A key rate move is likely to increase concerns about the state of the US economy, as well as trigger euphoria. The central bank is trying to suppress inflation with high rates without suffocating the economy. On the other hand, a small step of 25 basis points can ease investors’ fears of a recession. On the other hand, he will support a cautious, but perhaps too hesitant, approach to monetary policy.
“Whether the Fed cuts rates by 25 basis points or 50 basis points, the market reaction will depend on two things,” said Kathleen Brooks, senior analyst at brokerage XTB. “First, how they communicate the steps and the rationale for them, and second, what the Fed officials’ current expectations are for further rate developments.”
The U.S. stock market was lacking a clear direction at the start of trading. The Dow Jones Industrial Average briefly hit a record high at the opening, while the broader S&P 500 index fell slightly. The Nasdaq 100, a technology-heavy index that had been particularly strong the previous week, fell even more sharply.
Meanwhile, the prospect of a US rate cut is weakening the dollar. The euro rose to $1.1128 in the afternoon. In the morning, the euro was still trading below $1.11. One of the winners of the dollar’s weakness was the Japanese yen, which temporarily rose to its highest level against the dollar in about a year. Otherwise, there was a lack of clear impulse in the forex market. There was no front-line economic data from the euro zone or the US.
The prospect of lower interest rates in the US has led to a continued record-breaking effort in the gold market. In the morning, the price of 1 troy ounce (about 31.1 grams) on the London Stock Exchange hit a record high of $2,589.64. The price in euros also hit a record high of 2,334.80 per ounce during the morning. Gold prices have already hit a record high in the last trading day (most recently on Friday). The strongest price driver is the prospect of lower interest rates.
Oil prices rose after last week’s recovery. By afternoon, a North Sea Brent barrel for November delivery was at $72.69, up $1.09 from Friday. US West Texas Intermediate (WTI) crude for October delivery was up $1.25 at $69.89 a barrel. The market pointed to the improvement in oil supplies from Libya. Exports from the major producer and OPEC member have been sharply reduced due to recent political strife in the country.
The head of Italy’s leading bank Unicredit is pushing for a merger with Commerzbank. “At the moment we are only one shareholder. However, the merger of the two banks could create significant added value for all stakeholders and would make us a much stronger competitor in the German banking market,” Andrea Orcel, president of Unicredit, told “Handelsblatt”. There is little overlap between the institutes. This could create a bank that “complements each other geographically and is very balanced with private clients and corporate business.”
But Commerzbank CEO Manfred Knof sounded a note of caution. Commerzbank is strong and is sticking to its Strategy 2027 implementation to drive profitability, Knof said today on the sidelines of an event at Berlin’s ESMT University. He did not want to comment specifically on the possibility of a merger.
As the IAA trade fair for transport and commercial vehicles kicks off, Volkswagen is presenting the next generation of vans in Hanover. On the eve of the exhibition opening to journalists and trade visitors today, brand boss Carsten Intra presented the “New Transporter”, which will succeed the previous T6.1. Intra is confident that the new model will build on the success of the previous sixth generation of the “Bulli”.
Lower Saxony Prime Minister Stephan Weil is now counting on the struggling manufacturer to introduce cheaper models. “I see a gap in the Volkswagen product range at the moment, because people cannot yet buy a car from a car dealer in the lower price segment,” the SPD politician told the dpa news agency. “The name Volkswagen says it all and must be backed up by action.” Weil, who is also a member of VW’s supervisory board, stressed that VW is preparing both cars for 25,000 euros and cars for 20,000 euros.
Traton boss Christian Levin is calling for greater political support for electric commercial vehicles. The goal of having 50 percent of trucks electric by 2030 is still achievable, but “it can’t be achieved without a political change,” the head of Volkswagen’s commercial vehicle subsidiary told Reuters. That’s not just about the cost of electric vehicles, but also about charging infrastructure, permits and green electricity. “All of this has to come together.”
Daimler Trucks, the commercial vehicle manufacturer, plans to start mass production of long-haul electric trucks at the end of November. As the company announced yesterday at the IAA pre-event, the Mercedes-Benz eActros 600 with a battery capacity of over 600 kWh can drive 500 kilometers without intermediate charging. This means that if you charge during the regulated driver breaks, you can drive more than 1,000 kilometers during the day. According to Daimler Trucks, the range is achieved with a gross train weight of 40 tons.
Industrial group Thyssenkrupp and its steel subsidiary want to rejoin forces after weeks of conflict. Thyssenkrupp Steel Europe said the companies had jointly commissioned a report to determine the financial needs of the soon-to-be-departed steel subsidiary. “To review the long-term prospects for Thyssenkrupp Steel, we have commissioned the so-called IDW S 6 report together with Thyssenkrupp AG,” Dennis Grimm, spokesman for Thyssenkrupp Steel Europe’s board of directors, said on the sidelines of the Duisburg summit. The results are expected in early 2025.
The pharmaceutical and technology group Merck wants to expand its partnership with Siemens and drive digital transformation in manufacturing. As agreed in the declaration of intent, Siemens will become Merck’s preferred supplier in the area of so-called smart manufacturing technologies. “Our goal is to bring new products to market faster and more cost-effectively, with a greater focus on sustainability. Smartfactory is a key element in achieving this,” explains Kai Beckmann, CEO of Merck. Siemens will provide Merck with software and hardware solutions via the Siemens Xcelerator platform. Financial details of the partnership were not disclosed.
Südzucker has cut its annual targets for 2024/25, above all due to the fall in sugar prices. The board now expects sales to be between 9.5 and 9.9 billion euros (previous year: 10.3 billion) and operating profit (Ebitda) to fall significantly to 550 million to 650 million euros (1.3 billion), the group said. He had previously targeted sales of 10 billion to 10.5 billion euros and EBITDA of 900 million to 1 billion euros. Overall, he said, the economic and financial impact, as well as the duration of the war in Ukraine and the Gaza Strip, were difficult to estimate.
The rail and transport technology group Vossloh has signed a major contract with Deutsche Bahn. The order for the multi-year work, as announced by Vossloh, is worth over 100 million euros. Vossloh provides corrective and preventive maintenance of rails through high-speed grinding. In the last financial year, the company achieved sales of 1.2 billion euros.
The strike could cost the ailing Boeing more money. Moody’s is considering a credit downgrade. Among other things, it said it would monitor the duration of the strike and the aircraft maker’s financial results. Moody’s has given Boeing a rating one notch above junk status. Boeing’s largest union, with about 33,000 workers, went on strike Friday night.
Amid the struggle over the future of the Schwedt PCK refinery, Chancellor Olaf Scholz expects negotiations to conclude by the end of the year on the sale of shares in Russian state-owned company Rosneft. The SPD politician said this at a citizens’ dialogue in Prenzlau on Saturday. Rosneft’s two German subsidiaries own about 54 percent of the important industrial plant in Brandenburg. It is currently under federal trusteeship but is set to be sold. Scholz said the federal government has extended the trusteeship again because negotiations are ongoing. We know who is talking to Rosneft.
Vaccine manufacturer BioNTech is joining the Bundesliga football team FSV Mainz 05 as a sponsor. The biotech company, known for producing vaccines against coronavirus, will support Rheinhessen in all sports areas in the future, the club announced. He did not give details of the cooperation.
