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Dax closes slightly in the red

Dax closes slightly in the red

,   and  ASMedia
3 min read
Dax closes slightly in the red
Dax closes slightly in the red

Stock Exchange Scores in Frankfurt: DAX Treads Near Record High, MDAX Dips

The DAX index exhibited a slight decline from its recent record high in Frankfurt amid anticipation of the US Federal Reserve's interest rate decision. After touching a high of 16,836 points, the leading index closed at 16,766.05 points, marking a 0.15% decrease from the previous day's close. On the other hand, the MDAX index, representing medium-sized German stocks, plummeted by 0.58% to 26,427.65 points.

Yet, the DAX continues to surpass the MDax on a weekly basis, despite still being below the record high. In comparison, the MDax has only gained a modest 5% so far in 2023.

The modest softening of the US producer price increase in November failed to offer fresh momentum ahead of the Fed's interest rate decision. As expected, the Fed is likely to remain tight-lipped on monetary policy at their last meeting of the year. The gathering of financial analysts is keenly observing the hints from the monetary overseers, led by Jerome Powell, for forecasting future policy moves.

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  • Disregarding the US central bank's anticipated muted response to monetary policy at its upcoming Frankfurt interest rate decision, the DAX continued to maintain its position just below the record high.
  • As the Fed makes no major changes to its monetary policy, market participants keep a close eye on any signals from Jerome Powell and his team regarding future policy strategies.
  • Frankfurt Stock Exchange, home to both the DAX and MDAX indices, saw a slight decline in the DAX and a more significant fall in the MDAX, even with impressive annual returns.
  • DAX trading in Frankfurt today saw a peak of 16,836 points, only to close 0.15% lower, while the MDAX stumbled by 0.58%, remaining slightly behind its 2023 gain at 5%.
  • Despite the powerful performance of the DAX, which boasts a yearly gain above 20%, Frankfurt's MDAX index is slightly behind, yet to surpass equivalent highs seen in other exchanges such as the US Central Bank or Frankfurt.

Enrichment Insights:

The implications of the Fed's decision to keep the federal funds rate steady at 4.25% to 4.5% in January 2025 can bring about diverse effects on the global economy and financial markets, including the German stock market. Some potential impacts on the DAX and MDAX indices include the following:

  1. Global Economic Outlook: The Fed's cautious stance on monetary policy indicates a robust economy with high inflation. This may result in a split response in European markets, as investors weigh the possible benefits of continued economic growth against inflation risks.
  2. Interest Rates: The US rate stability might not directly affect German interest rates, yet it impacts the overall global interest rate environment. This stability could bolster European bond markets and stabilize the euro, which could ultimately benefit German stocks.
  3. Inflation Worry: The Fed's decision to maintain the rate despite inflation alerts shows an increased concern over price pressures. If inflation persists, European central banks may adopt a more cautious approach, keeping interest rates elevated, potentially supporting the German stock market as high-yielding assets grow less attractive.
  4. Market Sentiment: The Fed's decision to halt rate cuts indicates a more optimistic economic outlook. This optimism may lead to increased confidence among investors and result in increased stock investments, potentially benefiting both the DAX and MDAX.
  5. Sector-Specific Effects: Different sectors within the DAX and MDAX indices could display varying reactions to the Fed's decision. For instance, exposure to global trade and economic action sectors, like automotive and manufacturing, might benefit from a more stable climate.
  6. Commodity Prices: The stable global interest rate environment and focus on inflation might affect commodity prices. In this scenario, stable or rising commodity prices could positively impact DAX and MDAX indices with exposure to these commodities, such as energy and mining companies.
  7. Currency Effects: The strengthened euro against the dollar could also impact German stocks. A steady euro could make German exports more competitive, leading to enhanced performance for the DAX and MDAX index.

In conclusion, the Fed's decision to maintain the federal funds rate does not directly influence German interest rates but contributes to a more chilled global economic environment, which could strengthen investor confidence and potentially benefit the DAX and MDAX indices. However, the exact impact will depend on various factors, including sector-specific exposures and global economic trends.

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