WEEKLY OUTLOOK: Concerns about inflation and central banks set the course for Dax | News

FRANKFURT (dpa-AFX) – After surprisingly high inflation in the US ahead of the weekend fueled fears among many investors, the new week will bring Monetary policy central banks in focus. It is believed that it has been agreed that the US Federal Reserve (Fed) will continue its monetary tightening course on Wednesday to contain inflation. Now it should be decisive whether the pace will be increased than previously expected. We will see how investors accept it after last week’s weak stock markets.

Investors are now concerned about high inflation, which, according to data from Friday in the US, reached 8.6% in May, the highest level in over 40 years. Stock markets groaned for fear of inflation and waning economic confidence, said DekaBank chief economist Ulrich Kater.

Investors fear that high inflation in many regions of the world will soon worsen people’s spending mood as they simply have to spend more money on groceries, electricity and rent. At the same time, the tough policy of the US Federal Reserve to contain inflation could hold back inflation as high interest rates can make businesses and consumers more reluctant to invest and issue loans.

Inflation has yet to reach its peak, wrote economic strategist Aneta Markowska of investment house Jefferies. Hope that the current loosening in global commodity supply chains would bring inflation down again has weakened. Therefore, the expert expects that the Fed will raise interest rates by 0.75 percentage points.

Against the backdrop of inflation, it is not surprising that Dax fell a good three percent below 13,800 points on Friday alone. This threatens to permanently fall into the downtrend channel that lasted from January to the end of May. Such a test of the old downtrend is not uncommon, however, and – at least in terms of charting technology – is not yet a clear signal for further price declines.

And the European Central Bank is also under pressure to do something about inflation. The ECB reacted to the record high inflation later than other major central banks and announced the first interest rate hike in the Eurozone for July in eleven years. Above all, however, the stock exchange is interested in the pace of monetary policy tightening, which currently affects risky asset classes.

Interest rates are rising, making safe investments such as time deposits a problem again. The yields, which are still modest for now, are only a small consolation for investors. High inflation consumes this income.

In addition to the actions of US currency holders, retail sales in China and the US for May are also important in the new week. These will be released mid-week and could provide information on how far soaring prices are already curbing consumer spending. In Germany, the ZEW economic expectations are one of the first leading indicators for June on the Tuesday calendar. “Meanwhile, it seems that confidence is rising again, probably because risk scenarios such as the complete suspension of energy supplies from Russia have not materialized so far,” wrote an expert at Commerzbank Balz.

The big day of expiry in the stock markets is likely to move the stock market on Friday as well. Stock futures and index futures expire. The Brsians talk of a “big expiration” or “quadruple” when options and futures on indices and individual stocks expire on the same day. On these dates, stock prices and indices may fluctuate noticeably without any significant information about the company or economy. Behind these movements are market participants who are nearing their execution date in derivatives. In particular, fund or asset managers try to steer the current prices towards the prices at which they are involved in the futures exchange./ajx/ag/mis

— Author: Achim Jngling, dpa-AFX —

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