Stock market's DAX takes a 1.8% hit as financial indices feel the squeeze prior to the Federal Reserve's decision
In a day marked by uncertainty, the German stock market experienced a significant decline on Tuesday, with the DAX closing at 23,329 points, a 1.8% decrease from the previous day's close. This downturn was particularly noticeable in the financial sector, as Commerzbank, Deutsche Bank, and Heidelberg Materials shares were especially hard hit.
The CEO of Commerzbank, Bettina Orlopp, emphasized the risks of a potential takeover by UniCredit that could lead to revenue losses, reflecting the negative stock performance. Commerzbank's stock fell by 3.0 percent compared to the previous week.
Insurance titles also moved into the negative, mirroring the trend in the financial sector. However, a few chemical and technology stocks at the top of the price list held up relatively well, offering a glimmer of resilience in an otherwise challenging market.
The decline in the German stock market can be attributed in part to investors' cautious approach ahead of the Federal Reserve's interest rate decision on Wednesday. The Fed's decision is expected to have a significant impact on global financial markets, adding to the uncertainty that has been lingering.
Meanwhile, the European common currency appreciated against the US dollar. The euro was stronger on Tuesday afternoon, with one euro costing 1.1844 US dollars, and one dollar being available for 0.8443 euros. This strengthening of the euro was also influenced by monetary policy expectations.
The already high gold price was pushed even further up, with a troy ounce costing 3,684 US dollars (+0.2 percent). The increase in the gold price can be attributed to the prevailing uncertainty in the financial markets, as investors often turn to gold as a safe haven during turbulent times.
The oil price also significantly increased, with a barrel of North Sea Brent crude costing 68.33 US dollars at 5 PM German time on Tuesday, representing an 89 cents or 1.3 percent rise compared to the close of the previous trading day. This increase in the oil price adds to the overall economic uncertainty, as higher oil prices can lead to increased costs for businesses and consumers.
As the market continues to navigate these challenges, investors will be closely watching the Fed's interest rate decision on Wednesday for further indications of the market's direction.
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