Market Report
The DAX continues to rise over the weekend. After yesterday’s ECB rate cut, investors are now looking ahead to the US Federal Reserve’s (Fed) meeting next Wednesday.
German stocks continued their recent recovery and continued to rise over the weekend. “Stock prices are rising across the board as investors buy technology stocks at rock-bottom prices ahead of the Fed’s interest rate cut next week,” said Commerzbank experts. Technology stocks.
The DAX was up 0.4% in the morning at 18,584 points after already showing a good 1% gain yesterday. On a weekly basis, this represents a gain of almost 1.6%. “Investors are currently entering the stock market with a tailwind from a lot of monetary policy,” explains Jochen Stanzl, senior market analyst at CMC Markets. “It seems that the short-term correction in the DAX at 19,000 has already been overcome.”
The European Central Bank (ECB) cut the euro zone deposit rate by 0.25 percentage points to 3.50% as expected the day before. However, profit taking has begun, especially since the future direction of European monetary policy has been uncertain. ECB President Christine Lagarde said, “The ECB Board has not committed itself to a specific rate path in advance.” Further steps will depend on the data.
A recession also remains a risk factor for the stock market. “Any new signs of a recession would immediately bring back uncertainty,” Stanzl emphasizes. If there is no recession, a rate cut is “a gift because it promotes corporate earnings growth without the slowdown effect of an excessive slowdown.”
Now investors are eagerly awaiting the Fed’s interest rate decision next Wednesday. The financial markets are betting on a rebound in interest rates. Yesterday, new inflation data confirmed the forecast once again. U.S. producer prices rose 0.2% in August, a smaller increase than expected. However, it is unclear how much the rate cut will be.
Former New York Fed President Bill Dudley recently said there was a strong case for a 50bp cut. But Commerzbank sees that as unlikely. “The Fed’s top priority next week will be to begin the process of lowering rates,” the Fed said in a commentary, adding that it “expects a single 25bp rate cut to be sufficient.”
Yesterday, the U.S. stock market was just enough to show a moderate gain. The Dow Jones Industrial Average, the main index, closed at 41,096 points, up 0.58%. Meanwhile, there was a new sense of imagination in technology stocks, although more cautious than before the recent upheaval. The Nasdaq 100 Technology Index rose 0.97% to 19,423 points.
Asian stock markets were mostly flat today, with little movement in the direction of a consistent trend. Japan was down after a strong rally the day before. Deutsche Bank market strategists justified this by pointing to the yen’s strength against the dollar, which has been at its highest level since July 2023. This is weighing on South Korea’s export-oriented economy. The Nikkei 225 index, the main index, closed down 0.68% at 36,582 points.
Other major Asian bourses were less affected. Market strategists at Deutsche Bank noted growing uncertainty around the next Fed rate decision. A 0.25 percentage point cut was previously seen as the most likely option, but media reports have now raised expectations for a 0.50 percentage point cut. This creates uncertainty about how the U.S. monetary authority will actually make its decision.
The euro rose slightly from the previous day. The common currency was trading at $1.1081 in the morning. It rose yesterday afternoon due to the impact of the interest rate cut.
Oil prices continued to recover. The price increase was minimal compared to the previous two days. In the morning, the price of a North Sea Brent barrel for November delivery was $72.34, up 37 cents from the previous day. The price of West Texas Intermediate (WTI) crude oil for October delivery was up 37 cents at $69.34 per barrel.
The prices rose ahead of the weekend due to the continued positive sentiment in the financial markets. Market observers said that the prevailing price rally on the stock exchanges led to a greater willingness to take risks, which also boosted oil prices.
In the Bundesbank’s view, stability should be the top priority if Italy’s Unicredit takes over Germany’s Commerzbank. “We need a strong and solid bank,” Bundesbank President Joachim Nagel told Deutschlandfunk. The key to bank mergers is that the business models complement each other and create a competitive bank. “The supervisors will also be looking closely at this,” he said.
Meanwhile, economist Ulrike Malmendier sees the potential merger as more of an opportunity than a risk, not just for Germany but also for the financial sector and EU capital markets. “If Europe is to catch up with global financial markets, the sector cannot remain fragmented any longer,” the economic advisory council member told Reuters. Internationalization could be promoted by the merger of the two companies.
Danish logistics company DSV is acquiring DB Schenker, Deutsche Bahn’s logistics subsidiary. The price should be 14.3 billion euros, DSV said. A preliminary contract has been signed. According to DSV, the purchase should be officially completed in the second quarter of 2025 after receiving approval from the supervisory board and owners.
So DSV won against the second remaining bidder, the financial investor CVC. According to sources in the negotiations, he offered a slightly lower amount, but was favored by the Schenker union Ver.di, which fears that the sale to DSV will lead to large-scale job cuts, especially in the administrative sector.
Boeing, the troubled aircraft manufacturer, failed to stop its largest union from striking for higher wages. Yesterday, workers went on strike with an overwhelming 96 percent approval. In a deal with the IAM union, Boeing promised to increase revenue by 25 percent. About 33,000 workers build the Boeing 737, its best-selling model. The union had initially demanded a 40 percent increase. The deal was rejected by 94.6 percent of voters.
The world’s largest travel group, TUI, has started selling Latin American holidays, cruises and tours. “TUI is a global company with a global presence, but currently we mainly sell to European customers,” CEO Sebastian Ebel told dpa. Latin America represents another growth opportunity. “With our digital platforms, we can meet the growing demand in the region and expand quickly.”
Adobe shocked the market with a sales warning. The Photoshop maker had forecast fourth-quarter revenue of $5.5 billion to $5.55 billion, according to its own information the day before. However, analysts had expected $5.61 billion, according to LSEG data. The reason is that demand for AI tools is low due to fierce competition in the industry and a difficult economic environment. Adobe shares fell more than 9% in after-hours trading.
Business software provider Salesforce is looking to score points with so-called AI agents that can independently perform multi-step tasks, such as customer service. At launch, Salesforce demonstrated how the software could call a department store chain to exchange a sweater that was too small.
The program was able to immediately identify what order was being placed by accessing the customer’s account and could estimate which size would fit better based on previous purchases. The program was also able to list shipping options to the buyer’s address during the phone call.
