At the end of the week, growing fears of a recession sent the German stock market plummeting. The DAX loses two percent to 12,284 points. On a weekly basis, the leading German index even extends the loss to more than three and a half percent.
Interest rate and recession fears have Europe’s stock markets in their grip. At the end of the week, the DAX dropped by two percent to 12,284 points and was lower than it had been in almost two years. The other stock exchanges in Europe and the USA saw a similar downward trend. Oil prices tumbled to an eight-month low while the dollar, the world’s leading currency, soared to a fresh 22-year high.
“Investors are confronted with an interest rate turnaround at an unprecedented rate and are staying away from the stock market. And those who are in it are still calm, but are becoming more and more nervous,” said Jürgen Molnar, capital market strategist at the trading house RoboMarkets.
In the past week, the central banks in the USA, Great Britain and Switzerland had raised interest rates in the fight against rising inflation, which fueled investors’ fears of the global economic engine stalling. Added to this is the escalating Ukraine war. With the partial mobilization of the armed forces by the Russian president, the conflict has shifted into higher gears, Molnar said. On a weekly basis, the DAX lost 3.6 percent.
The euro continued its slide, hitting a 22-year low of $0.9726. “Obviously, the majority on the floor doesn’t believe that the European Central Bank can keep up with the fast pace of tightening by the US Federal Reserve,” said portfolio manager Thomas Altmann from investment advisor QC Partners.
The dollar index, which measures the currency against other major currencies, rose 1.5 percent to 122.86 points, the highest since May 2002. As a result, the price of gold fell to $1,640.20 per troy ounce, its lowest level since April 2020. North Sea Brent oil fell by around five percent to $85.88 per barrel. Forex, commodities were more expensive for buyers from other currency areas.
On the forex market, the pound fell more than 3 percent to $1.0915, its lowest level in 37 years. In addition to aid to cushion high energy prices, Great Britain is also planning massive tax cuts, which will cause the country’s debt to skyrocket. In this context, investors sold British government bonds.
Conversely, the 10-year yield rose 33 basis points, heading for its biggest one-day gain since the late 1990s. CMC Markets strategist Michael Hewson said investors were concerned that the government’s package would fuel inflation further and make it difficult to control. “The risk of even more aggressive rate hikes in November has risen sharply and markets are pricing in the possibility of a 100 basis point hike at the next meeting.” The Bank of England hiked interest rates by 50 basis points on Thursday.
Record price falls by Varta and Hypoport of 34 and almost 46 percent caused a stir on the German stock market. The battery manufacturer and the financial intermediary conceded their full-year targets. Jungheinrich provided a small ray of hope with a hopeful outlook. The shares of the forklift manufacturer jumped to the top of the MDAX and gained 3.5 percent. In Zurich, Credit Suisse stocks slipped 12.4 percent, at times they were cheaper than ever at CHF 4.04. According to insiders, the crisis-ridden bank is exploring a capital increase, which analysts say could have a volume of up to four billion francs (4.2 billion euros).
