Frankfurt Stock Exchange Faces Volatility: DAX Drops 3.3%
Stocks in DAX are experiencing significant declines at midday.
Germany's financial landscape witnessed a rollercoaster ride on Wednesday, with the Frankfurt Stock Exchange reporting substantial losses during the afternoon. The DAX Index plummeted by a staggering 3.3% around 12:30 PM, hovering around 11,665 points - a stark contrast to the previous trading day's figures.
Money movers pinpoint investor jitters concerning potential lockdowns as the primary cause of this turmoil. The upcoming federal-state round to discuss fresh COVID-19 measures has the city on edge, creating a tense atmosphere. However, there's a flicker of optimism in the air, with DWS's CEO, Asoka Wöhrmann, having predicted the German stock market to soar past 13,000 points before the year's end, despite the impending lockdowns. Wöhrmann, in an exchange with T-Online, expressed confidence that the market would initially drop following the U.S. election but would soon recover.
Interestingly, the stocks of Delivery Hero, Deutsche Bank, and Merck bucked the widespread trend, leading the gainers at midday. However, Beiersdorf, Infineon, and BASF bore the brunt of the losses. Meanwhile, the Nikkei index plummeted, closing at 23,418.51 points (-0.29%) due to various economic, geopolitical, and investor-related factors.
The Influence of Economic Indicators
The service sector's contraction, indicated by a dip in the HCOB Flash Germany Composite PMI to 48.6 in May, sparks concerns among investors. Although the manufacturing sector has demonstrated some resilience, the mixed picture poses a challenge for the stock market.
Trade Developments and Monetary Policies
Easing trade tensions resulting from the EU's decision to postpone trade countermeasures against the US has positively impacted market sentiment. On the flip side, ongoing tariff discussions continue to create instability. Moreover, expectations of interest rate cuts by the European Central Bank (ECB) have bolstered investor confidence, boosting the DAX.
Market Sentiment and Volatility Indices
An increase in polarization between bullish and bearish investors has been observed, with institutional investors leaning slightly towards the bulls. Conversely, private investors have displayed a slight decline in bullish sentiment, with some reveals of bearishness. The recent surge in the DAX volatility index - now at 23.35, representing a 9.83% increase - indicates high market anxiety, further contributing to the observed volatility.
Other investors remain cautious about the ongoing discussion for potential lockdowns and their impact on businesses, as the city's edge grows tighter. In contrast, DWS's CEO, Asoka Wöhrmann, is investing in optimism, predicting the German stock market to exceed 13,000 points before year-end.
