The DAX started the trading day on Friday morning with little change. By 9:30 a.m., the main index was calculated at around 26,050 points, marking a 0.2 percent increase from the previous day’s closing level.
Attention was focused on Volkswagen stocks as the week drew to a close. The VW supervisory board had approved the savings plan the previous evening, a plan that reportedly includes shedding tens of thousands of jobs and potential factory closures.
Jochen Stanzl, Chief Market Analyst at Consorsbank, noted that the recent “interest rate blues have severely shaken the DAX.” However, he expressed cautious optimism, stating that signals from the American Federal Reserve, coupled with today’s labor market data, create hope that the climb in US interest rates might yet ease for investors in September. Stanzl added that support held at 25,800 points on the DAX, with new buyers entering the market, establishing a technical foundation for a recovery, though the US labor market data would determine the next steps.
Stanzl also offered a critical assessment of the Federal Reserve’s current stance. He observed that the rise in yields this week reveals how little the market seems to care about even a single interest rate hike by the American central bank. He noted that the Fed appears to be aware of this, citing the surprising reversal of signals from three Fed governors-who are now sending more relaxed rate signals-just days after the clear and opposing words of Chairman Kevin Warsh. According to Stanzl, the Fed continues to speak in vague terms, finding excuses to delay decisions. Consequently, the Fed remains a factor of uncertainty for the markets, as only its actions, not its words, will reveal the seriousness of its inflation fight.
Furthermore, Stanzl pointed out that next week’s inflation data might carry more weight than today’s employment statistics, as two Fed governors, Williams and Barr, explicitly mentioned wanting to await this data before deciding on a September rate step. Despite this, the Fed operates under a dual mandate: price stability and the labor market. A “hot” job market with substantial new job creation outside agriculture could instantly dampen market interest rate concerns, making the period leading up to the next inflation report perhaps even more volatile. Thus, he concluded, today’s labor market report will primarily show how resilient the recent easing of interest rate expectations actually is.
In broader market movements, the European community currency strengthened slightly on Friday morning; the euro cost 1.1627 US dollars, and a dollar was obtainable for 0.8601 euros. The gold price remained virtually unchanged, trading at $4,473 per fine ounce in the morning, which corresponds to €123.69 per gram. Meanwhile, the oil price rose. A barrel of North Sea Brent crude cost $95.90 around 9 a.m. German time, up 38 cents, or 0.4 percent, from the previous trading day’s close.
