Before the central bank meetings this week and next week, the order of the day is to keep one's feet still. Uncertainty prevails, but most people do not expect the ECB to raise interest rates again this time. This is because high interest rates are increasingly weighing on the economy.
11 September 2023. FRANKFURT (Frankfurt Stock Exchange). Also in the coming days (almost) everything revolves around monetary policy. On Thursday, the ECB's interest rate decision is due. On Wednesday, the latest U.S. inflation figures will also be published. It is hoped that these will provide information on the further course of action of the US Federal Reserve, which meets a week later. The following applies to the euro zone: On the one hand, higher interest rates are increasingly weighing on the economy; on the other, inflation is still high. In the USA, on the other hand, inflation has already fallen significantly and the economy is more stable.
"Eurozone recession not unlikely"
"Market commentary on Friday provided a wide range of views on the potential outcome of the ECB meeting," Deutsche Bank reports. The money market was pricing in a probability of only 36 percent for a 25 basis point rate hike on Friday afternoon, it said. The majority did not expect an interest rate step - due to the weak leading indicators and the therefore not unlikely possibility of a recession in the euro zone.
Last week, the DAX was somewhat weaker and went out with a weekly minus of 0.7 percent. On Monday morning, it marks 15.850 points, a plus of nearly 1 per cent. "September is traditionally regarded as the most challenging stock market month of the year, so in this respect the unsuccessful start to the month fits well into the picture," notes Claudia Windt from Helaba. Economic and monetary uncertainties caused restraint.
"Quotations rising in the medium term"
According to Ulrich Kater, chief economist at DekaBank, the economy is currently lacking positive impetus. However, he points out that the valuation of DAX companies is below long-term averages. "That should keep the extent of any price corrections limited." In addition, inflation is expected to decline in the fourth quarter, and the interest rate peak is in sight or has already been reached. "In this combination, we can expect further fluctuations, but rising prices in the medium term."
Kater
Technique: Uncertain situation continues
From a technical point of view, there is still no all-clear: "The DAX is holding its ground above the support zone," explains independent technical analyst Christoph Geyer. But that is the best that can be said about the DAX at the moment. The indicators are in neutral territory, the intraday turnaround on Friday was accompanied by low turnover. Also from the seasonal side, the situation is to be described as rather tense until the beginning of October. "Thus, the uncertain situation is unlikely to change much in the coming weeks."
Geyer
Important economic and business dates of the week
Tuesday, September 12
11:00. Germany: ZEW Indicator of Economic Sentiment September.
Wednesday, September 13
11.00. Eurozone: Industrial production July. Helaba expects a small plus of 0.4 percent year-on-year. In June, it was still a minus of 1.2 percent.
2:30 p.m. USA: Consumer prices August. After U.S. consumer prices barely rose in June and July, Commerzbank expects a strong increase in August. However, this is only due to a presumably temporary increase in gasoline prices. The core rate, which is more important for the trend, will probably again indicate an easing inflation situation.
Thursday, September 14
2:15 p.m. Eurozone: ECB interest rate decision. Meanwhile, the market predominantly expects a pause in interest rates and a reference to October.
2.30 p.m. U.S.: August retail sales. DekaBank forecasts an increase of 2.6 percent year-on-year, mainly due to the increase in gasoline prices.
Friday, September 15
4:00 PM. China: industrial production and retail sales August. The real estate crisis and weakness in foreign trade have weighed on industrial production in recent months, according to DekaBank. Both factors continued to have an impact, but the latest purchasing managers' indexes indicated stabilization. The bank expects industrial production to have grown by 3.9 percent year-on-year Monday, up from 3.7 percent in July. However, it said sentiment in the housing market and among consumers remained poor, with no strong economic recovery in sight.
By: Anna-Maria Borse, 11 September 2023, © Deutsche Börse AG.
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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Borse