The German DAX opened Thursday morning on a down day. By about 9:30 a.m. local time the benchmark was trading at roughly 24,070 points-about 0.6 % below yesterday’s closing level. The strongest performers at the start of the session were Merck, Airbus and Heidelberg Materials, while Deutsche Post, Qiagen and Continental were among the lowest.
Thomas Altmann of QC Partners noted that volatility remains high and is likely to stay that way for a while. He said the initial bargain hunters were able to take advantage of the falling prices, providing a floor for the market at least in the short term. “Most people are now waiting to see how the situation in the Middle East develops” he added.
Oil prices, meanwhile, kept climbing. A barrel of Brent crude was trading at $84.04 per barrel at 9 a.m. German time on Thursday, up 3.2 % from the previous day’s close. Altmann warned that the longer the war and the block of the Strait of Hormuz persist, the larger the impact on global energy supply will become. “At this point the conflict not only affects the directly involved states but the entire global economy” he said.
The rising oil price and the accompanying fear of a renewed inflationary spiral are also altering expectations for policy rates. Altmann added that in the U.S., the probability of two rate cuts this year is now priced in at only 66 %. Before the outbreak of the conflict the odds of a third cut were 40 %. In the Eurozone, investors now see a 25 % chance of a rate hike this year, whereas last Friday the probability of a rate cut was still 50 %.
