Stock Market Update: DAX Recovers Well Post-Reset - Evaluating U.S. Monetary Policy Impact
Let's Break Down the Financial News
The German leading index sprang 0.8% on Thursday, reaching 13,737 points, while the EuroStoxx50 added 0.3%. However, these gains were partially thwarted by apprehension over the US Federal Reserve's future monetary policy. The minutes from the Fed's latest meeting provided scant information about their intentions for another large interest rate hike in September.
Analysts at Helaba noted that while there was emphasis on the need for more interest rate hikes, the pace could be reduced based on economic development. On the forex market, investors braced for additional aggressive interest rate hikes in the USA, causing the dollar index to climb to a three-week high of 106.95 points.
Participants in the Fed meeting early signaled that it might take longer than anticipated to solve the inflation issue. The central bank had previously raised the key interest rate by 0.75% in both June and July, now ranging between 2.25% and 2.50%.
In the Eurozone, inflation concerns persist, with another interest rate hike unlikely to be delayed for long. The ECB's Isabel Schnabel stated in an interview with Reuters that the inflation outlook has not materially changed since July. The Euro traded 0.2% lower at $1.0162 on Thursday, while yields on ten-year German government bonds rose, hitting a nearly four-week high of 1.150%.
On the corporate front, many individual stocks recouped losses after the DAX dipped by two percent mid-week due to inflation and recession worries. Covestro and BASF each gained about 2.5%, whereas they lost 5.3% and 4.6%, respectively, the previous day.
Shop Apotheke's shares were in demand, boosted by its Swiss competitor Zur Rose's optimistic outlook. The online pharmacy aims to achieve operational profitability earlier owing to cost savings and efficiency measures. Their shares skyrocketed by up to 14.5% on the Swiss exchange, with Shop Apotheke shares temporarily gaining more than 6% in the SDax.
Oilfield supplier Schoeller-Bleckmann saw shares climb 6.5% due to strong demand from the oil and gas industry. Their operating profit (EBIT) reached €44.8 million in the first half of the year, up from €8.9 million during the same period last year.
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Navigating Monetary Policies: A Comparative Look
While the US Federal Reserve and the European Central Bank share a common goal of balancing employment and inflation targets, their approaches may differ.
US Federal Reserve:- Interest Rate Plans: Following its latest meeting in May 2025, the Fed maintained interest rates within the target range of 4.25-4.50%.- Framework Review: The Fed is currently reassessing its monetary policy framework to absorb lessons from recent economic shifts, such as the 2021 inflation surge.
European Central Bank:- Actions: Typically, the ECB adjusts interest rates and quantitative easing policies to manage inflation and support economic stability.- Latest Information: There is a lack of specific information about the ECB's latest developments or meetings. To find the latest ECB stance and actions, consult the minutes or press releases from their most recent meeting.
The business impact of monetary policies was evident as analysts anticipated more interest rate hikes from the Federal Reserve, causing the dollar index to rise. In contrast, the European Central Bank's approach may differ, with their latest developments or meeting details currently unclear.
