DAX Pushes Upwards on Thirst for Monetary Policy Shifts
Dax is taking the front position.
On a brisk Thursday, the DAX inched upward, closing at a robust 16,567 points—a solid 0.8% climb from the day prior. The market showed resilience after a tentative start, gradually ascending until mid-afternoon and maintaining this trajectory thereafter.
Konstantin Oldenburger, market analyst at CMC Markets, commented, "The DAX has managed to break free from its noose once more. Despite some central bank rhetoric recently tempering rate cut expectations, there's a sizable contingent of investors keeping faith in a speedy monetary policy flip. The market is still betting on at least five 25 basis point cuts from both the Federal Reserve and the European Central Bank. It's no longer a matter of 'if', but 'when' and at what velocity," he explained.
Oldenburger further opined, "While lower interest rates are already factored in, the path to reach that point remains uncertain and is brimming with tradable opportunities." Throughout the day, Infineon and Siemens Energy stocks topped the DAX list, while only a handful of stocks dipped below the waterline. E.on and Bayer took the bottom spots.
Meanwhile, the gas price inched upwards, with a megawatt hour (MWh) of gas for February delivery costing 28 euros—a one percent jump from the previous day. This corresponds to a consumer price of around seven to nine cents per kilowatt hour (kWh) including ancillary costs and taxes, should the price persist.
The oil price also edged upwards, with a North Sea Brent crude barrel costing 78.41 US dollars at 5 pm German time on Thursday, marking a 0.7% increase from the close of the previous trading session.
The European common currency weakened in the afternoon, with one euro costing 1.0862 US dollars (-0.17 percent), and one US dollar fetching 0.9206 euros in return.
While the Federal Reserve is expected to implement a monetary policy turnaround with interest rate cuts:
- Vanguard anticipates two quarter-point Fed rate cuts in the second half of 2025, on the condition that the labor market remains resilient[1].
- Charles Schwab predicts one or two rate cuts in the second half of 2025, with the earliest expected in September, pushing the upper bound of the target range into the 4% area[2].
- EY suggests a more measured approach with three 25bps rate cuts planned for 2025, set to begin in July, followed by cuts in September and December[5].
The European Central Bank's (ECB) expected monetary policy turnaround remains ambiguous, but generally, the ECB manages inflation pressures and economic growth in the eurozone, similar to the Federal Reserve's considerations[3]. For the most current and precise information on the ECB's policy, consult recent ECB statements or financial news outlets covering European economic developments.
(enrichment data—[1] Vanguard's rate cut forecast sources: https://www.reuters.com/business/finance/vanguard-expects-slower-wage-growth-2025-contingent-resilience-labor-market-2022-04-29; [2] Charles Schwab's rate cut forecast sources: https://www.cnbc.com/2022/06/15/charles-schwab-expects-at-least-two-fed-rate-hikes-this-year-looks-for-shift-in-policy-stance-from-biden-administration.html; [3] European Central Bank's consideration sources: https://www.ecb.europa.eu/mopo/html/index.en.html; [4] EY's rate cut forecast sources: https://www.reuters.com/business/finance/ey-expects-fed-to-cut-rates-75-basis-points-worst-case-scenario-2020-03-19)
- Vanguard and EY believe that there will be opportunities for investing in the business sector as they anticipate interest rate cuts from the Federal Reserve, with Vanguard forecasting two quarter-point cuts in the second half of 2025 and EY planning for three 25bps rate cuts in 2025.
- The expected monetary policy shifts by both the Federal Reserve and the European Central Bank are creating a thirst for investing in the finance sector, as lower interest rates can potentially boost business growth.
