The DAX suffered losses at the start of the week, settling at 24,417 points by the close of trading, marking a decline of 1.2 percent compared to the previous day.
According to Andreas Lipkow, Chief Market Analyst at CMC Markets, losses in the DAX were somewhat contained today, given the ongoing uncertainty in the Middle East and rising energy prices. “After the considerable optimism of Friday afternoon, uncertainty has returned to the stock market over the weekend. The longer oil prices remain at high levels, the greater the impact will be on the inflation rate and consumer spending behavior. It’s not about whether a barrel of oil costs above or below $100; rather, it’s about the trend and the duration of the price remaining at elevated levels”.
Lipkow pointed out that recent geopolitical events, such as the US capturing a ship departing an Iranian port over the weekend, prompted Iran to postpone further negotiations with the US. “With every further breakdown in talks between the warring parties, the incentive for new approaches diminishes, taking with it investors’ motivation to buy stocks. The ceasefire is only nominal, and the numerous small hotspots in the region and Iran cannot be easily controlled or extinguished”.
Therefore, the situation remains complicated and hard to predict. However, the long-term economic consequences of the war are already becoming apparent. The restoration of merely the destroyed infrastructure is expected to take years. “Rising energy costs are likely to affect food prices particularly in the coming months. This could lead to rising inflation through second and third-round effects, influencing higher wages and salaries. Investors need a significant amount of optimism today just to justify purchasing shares in European companies”.
He concluded that the coming weeks are expected to remain volatile and hold many surprises. “Combined with the ongoing reporting season, an explosive mix could quickly develop for the financial markets. Among the few winners in the DAX today was Commerzbank, after the takeover matter was reignited by Unicredit. The Italian bank reported positive movements and released further details regarding the planned acquisition of Commerzbank”.
In other market movements, the European common currency strengthened by Monday afternoon, with one Euro costing $1.1789, making a dollar available for 0.8482 Euros.
The price of gold showed weakness, finishing the afternoon at $4,803 per fine ounce, a drop of 0.6 percent. This equates to a price of 130.99 Euros per gram.
Meanwhile, the price of oil rose significantly. A barrel of Brent crude oil from the North Sea cost $95.25 by Monday afternoon around 5 PM Central European Time, representing a 5.4 percent increase from the previous day’s closing.
