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Wall Street in standby mode

market report

After the recent rally, investors in New York took a breather. However, the indices are still at a high level and investors remain on the move when it comes to interest rate fantasy.

The US stock markets took a breather today after the latest record hunt. After slightly weaker inflation this week suggested somewhat more rapid US interest rate cuts, this effect has recently faded into the background. Because many investors now expect that the key interest rates will only be lowered once this year.

Despite the recent disillusionment, investors remain unbrokenly optimistic. The hope that postponed does not mean cancelled, together with the seemingly endless profit fantasy surrounding the topic of artificial intelligence (AI), continues to drive the stock markets.

This is despite officials at the US Federal Reserve (Fed) never tired of emphasizing that it could take longer for inflation to reach the bank's two percent target. It is not the first time that the central bank has dampened investors' interest rate fantasies.

“Markets are now at a crossroads,” said Stuart Cole, senior macroeconomist at Equiti Capital. “As central banks are all very data dependent, markets will also adjust their expectations based on upcoming data.”

The major stock indices on Wall Street were not moving at all for a long time today due to a lack of news. The leading index, the Dow Jones, only rose moderately in late trading and ended at 40,003 points, just over the 40,000 mark that had only been crossed for the first time the day before. In percentage terms, this was an increase of 0.34 percent, which had not been expected for a long time. How significant today's final spurt was remains to be seen.

The other major indices, however, barely moved. The broad S&P 500 rose slightly today by 0.12 percent to 5,303 points. The technology-heavy Nasdaq 100 and the Nasdaq Composite Index each lost around 0.1 percent and were therefore almost unchanged.

The DAX fell further away from its record at the end of the week and before Pentecost. In the end, the leading German index closed moderately lower at 18,704 points, down 0.18 percent. It only reached a high of 18,892 points on Wednesday. The 19,000 point mark remains unreached for the time being.

The fluctuation range was small and was between 18,627 and 18,723 points – another sign that the market was out of steam today. In a weekly comparison there is a slight minus of 0.35 percent. Not much happened after hours either.

“After the record hunt in the current trading week, the DAX seems to be slowly running out of steam,” said financial market expert Andreas Lipkow, pointing out that a trend towards profit-taking had already become apparent on the US stock market the day before. The most important indices in New York were ultimately unable to maintain their record levels after the US leading index Dow Jones exceeded the 40,000 point mark for the first time in its long history.

Things were also quieter on the corporate side before the weekend, also because the reporting season is coming to an end in Germany. Only a few general meetings were still on the agenda, from the DAX those of Zalando and Fresenius. Despite the public holiday on Monday (Whit Monday), the stock exchange in this country remains open. The MDAX of medium-sized stocks also fell moderately by 0.24 percent.

However, there is still a lot of interest rate fantasy in the market, so that the markets remain at the highest level. There is no sign of a greater willingness to sell, on the contrary: declines are usually used immediately to make purchases. This is despite the cautious monetary policy of the US Federal Reserve. The majority do not expect interest rates to be cut for the first time this year until September, as inflation remains stubborn and the labor market remains robust.

“Several leading figures at the US central bank have spoken out in favor of continuing the restrictive monetary policy,” said Landesbank Baden-Württemberg. “They are calling for key interest rates to remain high for a longer period of time until there are clear signals of declining inflation.” This put a damper on the hopes of interest rate cuts that had been fueled by new US inflation data in the middle of the week.

In Europe, investors are firmly expecting the European Central Bank (ECB) to cut interest rates for the first time in June, also because inflation here is approaching the desired target of 2.00 percent. But beyond that there is uncertainty. Central bankers on both sides of the Atlantic are warning against calling the fight against inflation already won.

The euro recovered from its morning weakness in late afternoon European trading. Most recently, the common currency cost 1.0874 dollars in US trading. The two-month high against the dollar marked the day before is not far away. The European Central Bank set the reference rate at 1.0844 (Thursday: 1.0866) dollars.

The euro initially fell – market participants pointed to declining interest rate expectations from the US Federal Reserve. After weaker inflation this week suggested somewhat quicker interest rate cuts, this effect has now almost completely evaporated.

Inflation data from the Eurozone brought no surprises this morning. Inflation stagnated at 2.4 percent in April, as the statistics office Eurostat confirmed in a second estimate. Core inflation excluding energy and food, however, fell. Due to the declining inflation trend, the ECB is expected to cut interest rates, the first as early as June.

Oil prices rose slightly today. Most recently, a barrel (159 liters) of North Sea Brent cost $84.00 for delivery in July. That was 0.63 percent more than the day before. The price for a barrel of US West Texas Intermediate (WTI) for June delivery rose 0.98 percent to $79.63.

The prices were supported by the prospect that the Fed might loosen its monetary policy a little sooner. In addition, the ongoing shortage of crude oil supplies from major producing countries is causing prices to rise. In the weekly balance, oil prices are heading for moderate gains. There have been no decisive drivers recently. Since the beginning of the month, oil prices have remained in a relatively narrow trading range.

Raw materials expert Barbara Lambrecht from Commerzbank pointed out that oil prices have not risen significantly despite a significant decline in US oil reserves. This casts a first shadow over the upcoming meeting of the oil association OPEC+ on June 1st, in which members of the oil cartel and other producing states such as Russia are organized. “It will probably be difficult for the expanded funding cartel to reverse the voluntary cuts from July without risking a drop in prices,” said Lambrecht.

Some stocks were once again traded at a dividend discount today and therefore appeared visually lower. In the DAX these were Adidas (0.70 euros), Eon (0.51 euros), Deutsche Bank (0.30 euros) and Heidelberg Materials (3.00 euros).

After lengthy negotiations, Deutsche Telekom has agreed on a new collective agreement with the Verdi union. According to Telekom human resources director Birgit Bohle, the Bonn-based group has agreed to the highest wage increases in the company's history.

“The result is painful, but we have made up our minds to prevent continuous strikes at the expense of our customers.” Some investors then breathed a sigh of relief. The T-Share increased its gains slightly after the agreement was announced and closed half a percent higher.

According to the information, Telekom's collective bargaining employees will receive an inflation compensation bonus of 1,550 euros in July before collective wages rise by six percent on October 1, 2024. From August 1, 2025, the fees increased by a further 190 euros per month. At the same time, trainees and dual students received an additional 95 euros per month and a six percent increase in remuneration as well as an inflation compensation bonus of 775 euros. The collective agreement has a term of 24 months.

The Leverkusen-based pharmaceutical and agrochemical company Bayer has published study details on the active ingredient elinzanetant. The drug significantly reduces the frequency and severity of hot flashes associated with menopause compared to placebo, Bayer announced, referring to results from the approval-relevant Phase III studies (Oasis 1 and 2). In mid-March, Bayer announced that it was planning to approve the drug for certain menopausal symptoms.

The commercial vehicle manufacturers Daimler Truck and Volvo are planning a joint venture for the digitalization of heavy commercial vehicles. Together, the two companies want to establish a joint venture to develop a common software-defined vehicle platform and a truck operating system that will form the basis for future software-defined commercial vehicles.

Daimler Truck and Volvo each want to hold half of the company. The joint venture is intended to enable both commercial vehicle manufacturers and potentially other partners to provide independent digital vehicle functions for their products.

According to a media report, talks between Renault and Volkswagen about a joint entry-level electric car have failed. In the end it was not possible to find a common solution, a person familiar with the process told the Reuters news agency. The negotiations were apparently well advanced. VW ultimately withdrew and wanted to develop the vehicle alone. A spokeswoman for Renault's Ampere electric car division and a VW spokesman declined to comment.

The failure of the talks with VW is a setback for Renault boss Luca de Meo's hopes of achieving closer cooperation between European car manufacturers in the face of competition from China. If VW and Renault had cooperated, insiders say this could have been the foundation of an “Airbus for cars”. A few days ago, Chinese electric car manufacturer BYD announced that it would launch its Seagull model in Europe for less than 20,000 euros.

According to a press report, the energy technology group Siemens Energy wants to sell the Indian wind turbine division of its subsidiary Siemens Gamesa Renewable Energy. The valuation of the business in the transaction was one billion US dollars, the Indian business newspaper Mint reported on its website on Friday, citing two people familiar with the matter.

According to the report, the division's annual sales are $700 million. A Siemens spokesman did not want to comment on the matter in detail. According to the circles, the possible interested parties, as well as the British bank Barclays, which was commissioned with the sale, did not initially respond to inquiries. The ailing Munich DAX

The group seems to be slowly getting back on track. The second quarter of the business was better than expected, which prompted the company to raise its forecast for the full year….

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