Dax exhibiting a somewhat slower commencement to the week.
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The Dax kicks off the week on a shaky note, with a 0.3% slump to 20,339 points by midday. The Euro Stoxx 50 took a 0.5% dive to 4,945 points. Traders are keeping their wallets closed in anticipation of the Federal Reserve's interest rate meeting later in the week, where a 25 basis point hike is expected on Wednesday. The Bank of England's interest rate decision is scheduled for Thursday. The economic data from China has left market participants disappointed, according to analysts at Commerzbank who question if recent measures are making much of a difference, as November's retail sales only rose by 3%, down from 4.8% in October.
Vonovia takes center stage in the Dax, plummeting 3.6% to €29.91. The large housing firm has finalized the compensation plan for Deutsche Wohnen shareholders, moving one step closer to completing the full takeover and forcing out original shareholders. Shareholders of Deutsche Wohnen will receive an annual compensation payment of €1.22 per share, pending the approval of a court-appointed contract auditor. While the analysts at Goldman Sachs have kept their 'Buy' rating for Vonovia with a price target of €46.50, they point out that the compensation for Deutsche Wohnen shareholders is slightly higher than originally planned.
Bitcoin sets a new high, soaring to $106,533 on Monday. Market experts believe that under President Donald Trump, a 'strategic Bitcoin reserve' will be established alongside the US's strategic oil reserve. With expectations that Bitcoin will now target the $110,000 mark, analysts expect the cryptocurrency to continue its upward trajectory.
The price of the benchmark oil grade Brent Crude takes a 0.9% dive to $73.84 per barrel, as traders engage in some profit-taking. The oil price is supported by expectations that the Fed will lower interest rates during the current week and that new sanctions from the outgoing US administration will be imposed against Russian and Iranian oil under President Joe Biden.
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Intriguingly, the Federal Reserve's decision to raise interest rates can ripple through European markets due to the interconnectedness of global financial systems. This connectedness can lead to currency fluctuations (euro versus US dollar), shifts in global capital flows, adjustments in monetary policy, economic slowdown, and changes in inflation and trade. European policymakers and investors closely monitor these developments to manage risks and seize opportunities effectively. When the Fed hikes interest rates, it typically does so to combat inflation or prevent the economy from heating up. These hikes can result in increased volatility in currency markets, potential lowering of stock prices, and increased bond yields across Europe. The reduction in global liquidity could also impact European financial markets, particularly if investors shift toward safer US Treasury bonds. The European Central Bank might respond by raising interest rates to maintain stability and control inflation. Overall, the Federal Reserve's hikes can have far-reaching effects on the European economy.
- European investors and policymakers are keenly watching the Federal Reserve's interest rate meeting this week, as a 25 basis point hike could potentially lead to increased volatility in currency markets, potential lowering of stock prices, and increased bond yields across Europe, due to the interconnectedness of global financial systems.
- The ripple effects of the Federal Reserve's decision to raise interest rates can also extend to the investing sector, as increased interest rates may make borrowing more expensive for European companies, which could in turn impact their ability to invest and grow, potentially affecting the overall performance of the Eurozone industry.
