The DAX saw gains on Wednesday, closing at 25,299 points, marking a rise of 0.2 percent compared to the previous day’s close. Although the index started the day positively, the gains were only maintained temporarily.
Amid market movement, Andreas Lipkow, Chief Market Analyst at CMC Markets, noted that unexpectedly high US consumer prices are creating new nervousness in both the stock and bond markets. He highlighted that sharply increased gasoline and diesel prices are now having a noticeable impact on inflation. Furthermore, the core interest rate rising faster than expected suggests that price pressures could begin to spread to other economic sectors.
Lipkow explained that this increases the likelihood that the US central bank will have to tighten its restrictive monetary policy. He views this as an unpleasant development for stock markets: high energy prices drive inflation, rising interest rate expectations keep bond yields elevated, and, consequently, stocks with their sometimes ambitious valuations are becoming less attractive. He warned that this energy price shock could evolve into a prolonged interest rate problem.
According to Lipkow, inflation-fighting will be one of the first major tests for Fed Chair Kevin Warsh, as price increases have been above the central bank’s two-percent target for some time. Current data demonstrates how difficult it will be to bring price pressures under control without simultaneously burdening the economy.
Uncertainty is also growing among investors in Frankfurt regarding whether German stocks, given the high bond yields, remain the optimal investment choice. The analyst commented that the sell-off from the previous day, which followed positive US quarterly results, combined with the announced portfolio reallocations by Blackrock toward government bonds, has left a significant mark. Such shifts are often not short-term choices but can signal a fundamental and sustained change in strategy.
Lipkow stated that the calculations for investors are changing. High bond yields offer attractive returns, while justifying the high valuations in the stock market is becoming progressively harder. He added that if inflationary pressure eases, government bonds could benefit even more significantly. This potential dynamic could shift the existing competition between stocks and bonds, leading to sustained capital flow toward the fixed-income market.
In market specifics, Rheinmetall stock topped the list of gainers in Frankfurt, followed by MTU, Airbus, and Merck. The weakest performers were the Siemens Energy shares and Volkswagen.
Meanwhile, the gas price saw a slight dip, costing 87 Euros for a Megawatt-hour (MWh) delivered in November. If this price level remains stable, it implies a consumer price of at least 13 to 16 cents per kilowatt-hour (kWh), inclusive of ancillary costs and taxes.
Conversely, the oil price edged up. The Brent crude oil in the North Sea was priced at $105.70 per barrel on Wednesday afternoon around 5 PM Central European Time-four cents higher than the previous trading day’s close.
The European common currency weakened on Wednesday afternoon, with the Euro trading at $1.1122, while the Dollar was available for 0.8991 Euros.
