Markets at Noon Bell
Dax on the verge of reaching record-breaking heights.
The Dax kicked off the day just beneath its all-time high on Thursday, holding steady from the previous day's closing. Investors are on tenterhooks, awaiting the decision on interest rates by the European Central Bank (ECB) and the ensuing press conference. With a solid year-to-date gain of around 22% in the German benchmark index, they're comfortably cushioned and eager to safeguard their gains.
By noon, the Dax had climbed by 0.1% to 20,410 points. It briefly touched its recent record high on Monday in the morning but faltered slightly. The MDax remained mostly still, closing at 26,894 points, slipping 0.1%.
Minding the ECB's Movements
Economists predict the ECB to make a minor interest rate cut of 0.25 percentage points, following their shift in strategy in June. Since no surprises are anticipated, the focus will be on the interest rate forecast and the updated growth and inflation predictions, as suggested by portfolio manager Thomas Altmann of QC Partners.
At present, market participants are pricing in additional interest rate cuts of 0.25 percentage points at each of the ECB's subsequent meetings, according to Altmann. He anticipates ECB President Christine Lagarde to maintain ambiguity and emphasize the data-dependent nature of future interest rate decisions. "Even so, the new ECB projections could offer valuable insights," he added.
BASF Showing Promise
In the Dax, BASF was the day's top performer with a gain of 1.3%. Analyst Thomas Schulte-Vorwick of Bankhaus Metzler upgraded the chemical stock to "buy" and stated it as historically attractive. Schulte-Vorwick believes the advantages now outweigh the risks. Potential catalysts could include unexpectedly robust economic stimuli from China, recovery in the construction sector under favourable interest rates, or a possible peace accord in the conflict between Russia and Ukraine.
BMW, Mercedes, and Volkswagen shares rose between 0.5% and 0.9%. German Economics Minister Robert Habeck (Greens) plans to boost electric vehicle (EV) sales through charging credits and tax incentives. According to a concept paper from the Federal Ministry for Economic Affairs and Climate Action, as reported by the Funke media group, EV owners could receive financial assistance for charging their vehicles for a specified period. The paper also supports purchase incentives.
Hensoldt Slipping, Nemetschek Sinking
Hensoldt initially gained but later plummeted by 0.9%. The defense electronics specialist held a capital market day and discussed its medium-term objectives.
Nemetschek was the poorest performer in the MDax, sinking by 4.3%. US bank J.P. Morgan downgraded the construction software specialist to "underweight," citing overzealous earnings expectations and limited leeway for disappointment due to its exorbitant valuation.
Schott Pharma shares experienced volatility following mixed annual results and an uncertain outlook. They briefly bottomed out at a record low of 25.50 euros before recovering by 1.1%.
Insights:
The European Central Bank (ECB) cut interest rates by 25 basis points in early May 2025, with the deposit facility rate at 2.25% and the main refinancing operations rate at 2.40%. The ECB has lowered rates to their lowest levels since the end of 2022, with seven rate cuts since June 2024. Economic uncertainty remains, and downside risks to growth have been influenced by global trade tensions, supply chain disruptions, and tariff effects, including those related to U.S.-EU relations. The ECB is generally anticipated to continue its easing cycle, with up to two additional rate cuts expected by year-end. This move aims to buffer the Eurozone economy from external shocks and subdued growth, potentially supporting European equity markets like the DAX. However, ongoing uncertainty and downside risks could cause market fluctuations depending on the evolution of trade issues and inflation dynamics throughout 2025.
- Despite the Dax starting the day just beneath its all-time high, investors are cautiously optimistic, waiting for the European Central Bank (ECB)'s decision on interest rates and subsequent press conference.
- Portfolio manager Thomas Altmann of QC Partners anticipates the ECB to make a minor interest rate cut of 0.25 percentage points, with the focus on the interest rate forecast and updated growth and inflation predictions.
- In the Dax, Hensoldt, the defense electronics specialist, initially gained but later plummeted by 0.9% after its capital market day discussion of medium-term objectives.
- Nemetschek, a construction software specialist in the MDax, was the poorest performer, sinking by 4.3%, following US bank J.P. Morgan's downgrade to "underweight" due to overzealous earnings expectations and an exorbitant valuation.