By German stocks have continued to rise in early trade on Wednesday, building on their record-breaking performance. This boost comes as both Europe and the U.S. show signs of potential interest rate cuts.
The German DAX (DX:DAX) has increased by 0.2%, reaching 16,567. Meanwhile, the UK’s FTSE 100 (UK:UKX) and France’s CAC 40 (FR:PX1) have also experienced a slight rise.
The DAX has seen an impressive 19% growth this year.
Isabel Schnabel, a board member of the European Central Bank (ECB), recently stated that further rate hikes are “very unlikely.” She described recent inflation data as “a very pleasant surprise.” Her remarks, coupled with the lack of opposition to market expectations for rate cuts next year, have contributed to a decrease in bond yields. As a result, there is now an 86% chance of a rate cut in March.
Economists at Nomura predict that the European Central Bank will maintain its rate outlook at the upcoming meeting. However, they anticipate the bank will reduce its economic growth forecasts. This adjustment would subsequently lead to more expected rate cuts.
“We also think markets are unlikely to heed any warning from ECB President Christine Lagarde on market pricing being overly aggressive on near-term rate cuts,” noted Nomura economists in a statement.
In terms of individual stocks, Infineon Technologies (IFX) experienced a 2% increase, along with Volkswagen (VOW3), whose shares also rose by 2%.
However, Merck KGaA (MRK) failed to benefit from the rally. The company’s shares fell by 14% following disappointing results from a late-stage trial of its multiple sclerosis drug. It’s worth noting that Merck KGaA is not affiliated with the U.S. drugmaker of the same name.
Outside of Germany, Inditex (ITX) saw a decline of 2%, while H&M Hennes & Mauritz (HM.B) also experienced a 2% fall. Deutsche Bank downgraded both retailers to sell from hold, citing factors such as their belief that the post-pandemic rebound in clothing sales will diminish next year.
On a positive note, Tui (TUI) witnessed a 7% surge in shares. The travel group announced that its fiscal year results ending on September 30 were in line with expectations. Additionally, they anticipate at least a 25% rise in underlying earnings before interest and tax this year, accompanied by a minimum of a 10% rise in revenue.
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