On Thursday the DAX recorded a sharp decline. At the close of Xetra trading, the index was quoted at 23,815 points, a drop of 1.6 % from the previous day’s closing level.
Shortly after Frankfurt opened, rumours of a possible Iranian willingness to negotiate over its nuclear programme pushed the DAX above 24,350 points, said Andreas Lipkow, chief market analyst at CMC Markets. “But as the day progressed and further military actions unfolded, that optimism quickly melted into scepticism” he added. “Many are wondering who in the US might talk to Iran when there is no clear negotiator in Tehran. The situation remains tangled and, quite likely, won’t change much until at least the weekend”.
Consequently, the DAX slipped below the 24,000 mark during the trading day. Investors are worried that the conflict in the Middle East could flare up at any time, and rumours and speculation feed into the financial markets, making the situation more opaque, fuelling uncertainty and driving stock prices lower.
“We don’t yet know whether European equity markets will recover soon or face further downward pressure” Lipkow continued. “An important factor will be the development of oil prices. If prices keep climbing, investors may increasingly unwind exposure to European equities. Oil is more about trend dynamics than actual price levels at the moment”.
He warned that a period of higher oil prices could spark inflation again, which would threaten the fragile European economic revival before it fully takes hold. “In that scenario, the European Central Bank would be constrained; rate cuts would only fuel inflation further” Lipkow said.
The euro weakened in the afternoon: 1 € was worth $1.1569, and 1 $ was worth €0.8644.
Gold fell significantly; in the afternoon a fine troy ounce fetched $5,067, down 1.4 % from the previous close, equating to €140.81 per gram.
In contrast, oil rebounded strongly: at about 5 p.m. German time on Thursday, a barrel of North Sea Brent was priced at $84.84, up 4.2 % from the previous day’s close.
