The German DAX index experienced a noticeable decline on Monday, reversing an initially cautious positive start to trading. Shortly after 9:30 AM, the index registered at 24,285 points, representing a decrease of 0.4 percent compared to its closing value on Friday.
This downturn occurred despite earlier optimistic assessments from analysts, who had anticipated a positive trading session bolstered by significant gains in Asian markets and hopes for interest rate reductions. Jochen Stanzl of CMC Markets noted a prevailing sentiment that “the longer the US government shutdown persists, the higher the probability of two interest rate cuts before the year’s end. Currently, negative news is being interpreted as positive”. He added that upcoming private economic data, while indicating potential weakness in the US labor market, does not signal a serious recession, a scenario the market appears to be tolerating given the continued expectation of further Federal Reserve rate cuts.
The possibility of the US government shutdown extending for weeks remains a significant risk. Stanzl cautioned, “There will come a moment when the market expresses its displeasure regarding the duration of the shutdown, but that point has not yet been reached.
The Tokyo Nikkei index saw a surge of nearly five percent, driven by anticipated market-friendly policy changes attracting international investors seeking alternatives to the high valuations seen on Wall Street. Sanae Takaichi’s policies are viewed as market-oriented. Similar to her predecessor, Shinzō Abe, the market is hoping for an economic stimulus. While “Abenomics” initially proved popular with investors, enthusiasm waned over time and expectations are now high for Takaichi to achieve greater success.
The Euro weakened on Monday morning, trading at $1.1678, with the US dollar fetching €0.8563.
