Anticipation surges as Dax nears summit before ECB rate decision announcement
With the European Central Bank (ECB) interest rate decision lurking around the corner, the DAX defied expectations by hitting an all-time high. It soared to an impressive 24,399.03 points, with the Euro Stoxx 50 following suit at 5,428 points.
The ECB's impending interest rate cut is a foregone conclusion, with market participants expecting a 25 basis points decrease in the deposit rate, taking it down to 2%.
As inflation plummets, the ECB's path for a rate cut has been cleared. Inflation, surprisingly, dropped to 1.9% in May, below the ECB's target of 2%.
Goldman Sachs' recommendation sent Bayer shares surging, gaining 4.5% to hit 26.45 euros. The US bank believes the risks are outweighed by the chances in the second half of the year, including legal disputes, particularly those associated with cancer risks from the herbicide glyphosate.
Eutelsat suffered a significant blow, with its stock plummeting by up to 17% at one point, closing at 2.98 euros. South Korean industrial conglomerate Hanwha Systems sold its 5.4% stake in Eutelsat shares for 3 euros per share.
Wizz Air plunged after disappointing earnings, with its stock dropping 26.7% to 12.28 pounds. The airline reported a near 62% drop in operating profit for the fiscal year compared to analysts' expectations.
Ionos joined the MDax, replacing Jenoptik, which moved to the small-cap index SDax due to a diminished market capitalization. In the SDax, Mutares and Nagarro re-entered the index, while Verbio and Medios exited following delayed annual reports.
The weak US economic data renewed concerns about economic weakness and high inflation. Attention now focuses on the upcoming US jobs report on Friday. The euro remained relatively stable at 1.1419 dollars, while gold, Bitcoin, and Brent Crude saw minor increases.
In light of the upcoming ECB interest rate cut, discussions surrounding investing in European business sectors might warrant reconsideration, given the anticipated decrease in deposit rates to 2%. Goldman Sachs' recommendations could yield substantial gains, as evident in Bayer's share surge to 26.45 euros. On the contrary, strategic investments might come with risks, as seen in Wizz Air's stock plunge following disappointing earnings. Meanwhile, technology companies, such as Ionos, might present opportunities for growth, moving from the MDax to replace other companies that have Dax-sized market capitalizations but are now on the SDax, like Jenoptik.
