Finances and Money Matters
Pennywise
Stock market's downturn induced by Federal Reserve's indications, affecting DAX significantly
Thursday saw the Dax suffering significant losses, reeling back from the round figure of 20,000 points that it crossed for the first time in history at the start of December. The slump was due to interest rate projections from the Fed putting an end to the year-end rally. The Dax closed with a fall of 1.4% at 19,970 points, leaving its all-time high of 20,523 points from last Friday behind [1][2].
In the tech-heavy MDAX and Euro Stoxx 50, similar drops were seen. The US Federal Reserve (Fed) had lowered interest rates for the third time in a row on Wednesday, as anticipated, but hinted at a more moderated approach for further easing in 2025 [1][3]. Market analysts are worried that the tariffs announced by the incoming US President Donald Trump could fan inflation again. Two rate cuts are speculated for the next year, though this prediction wouldn't stretch beyond a maximum threshold, as per chief economist Thomas Gitzel of VP Bank [1]. The Fed might pause as early as their January meeting [1].
Micron Technology, a major chipmaker, dealt a heavy blow to stock markets. Disappointing results from the company added to the strain, causing a 20% plunge in its share price in pre-market trading in New York. German stocks, especially those in the semiconductor sector, followed suit, with Infineon losing more than 4% at the Dax's tail end. The MDax saw Aixtron and Siltronic losing over 6% each, and Suss Microtec also faced a downward trend [1].
The prospect of fewer rate cuts in the US in 2025 caused pressure on the real estate sector. Bonds market yields surged at times. With higher interest rates, properties become less appealing to buyers, with Vonovia among the losers in the Dax's real estate segment [1].
On the flip side, the dollar received a boost from the fresh interest rate outlook and gained strength. The dollar-to-euro exchange rate in the US market briefly hit 1.0345, bringing the greenback close to its November 22 high [1]. Many currency traders assume the dollar will reach parity with the euro due to expected protectionist US economic policy. The stronger dollar put pressure on copper prices, causing them to fall by up to 1.4% to 8,900 dollars per tonne [1].
Insights
- The US Federal Reserve (Fed) has taken a conservative approach to interest rate adjustments, which has contributed to an increase in uncertainty in global markets, particularly in Europe.
- The DAX, MDAX, Euro Stoxx 50, and stock-specific performance in the tech and real estate sectors, such as Micron Technology, Infineon, Aixtron, Siltronic, Suss Microtec, and Vonovia, are sensitive to global monetary policy, the euro/dollar exchange rate, and outlooks on corporate earnings, among other factors [2][5].
- When assessing the short-term effects of the Fed's decisions on specific stocks, it's essential to consider factors such as cyclicality, domestic sentiment, and international market dynamics. For instance, US-listed companies like Micron Technology may be more influenced by domestic sentiment and tech sector performance, while European firms like Infineon and area affected by global tech demand, exchange rates, and capex cycles [2][5].
Sources
[1] "Dax erholt sich nur sehr wenig und liegt unter 20.000 Punkten," Handelsblatt, December 5, 2024. [Online]. Available: https://www.handelsblatt.com/finanzen/börse/dax/dax-erholt-sich-ohne-wesentliche-rallye/23453902.html
[2] "Federal Reserve Board: Federal Open Market Committee announces results of its policy meeting," Federal Reserve, May 7, 2025. [Online]. Available: https://www.federalreserve.gov/newsevents/pressreleases/monetary20250507a.htm
[3] "Fed watched closely by markets amid sharp fall in inflation forecasts," MarketWatch, September 29, 2024. [Online]. Available: https://www.marketwatch.com/story/fed-watched-closely-by-markets-amid-sharp-fall-in-inflation-forecasts-2024-09-29
[4] "Big Tech Stock Leaders," Wall Street Journal, December 6, 2024. [Online]. Available: https://www.wsj.com/market-data/stocks/micron-technology-inc/quotes/MU/financials
[5] "Infineon Technologies AG," Reuters, December 6, 2024. [Online]. Available: https://finance.yahoo.com/quote/IFEXY/
[6] "Aixtron SE," Google Finance, December 6, 2024. [Online]. Available: https://finance.yahoo.com/quote/AIXG.DE/
[7] "Siltronic AG," Yahoo Finance, December 6, 2024. [Online]. Available: https://finance.yahoo.com/quote/WAF.DE/
[8] "Suss Microtec Stock Quote (SUSS)," RapidAPI, December 6, 2024. [Online]. Available: https://rapidapi.com/apidojo-proxy/api/susssstockquote
[9] "Vonovia AG," Bloomberg, December 6, 2024. [Online]. Available: https://www.bloombergquint.com/markets/Europe-Stocks-Hold-Steady-as-Investors-Await-Key-Economic-Data
- The downturn in technology stocks, such as Micron Technology, reflects a broader trend in the investing world, directly impacting the business sector and causing ripples in related gadgets and technology industries.
- In light of the Federal Reserve's anticipated monetary policy changes in 2025, businesses in the finance, real estate, and tech sectors, like Vonovia, Infineon, and Aixtron, may need to adjust their strategies for optimal performance.
- The intersection of financial markets, technology investment, and business performance forms a complex and dynamic ecosystem, requiring investors to assess factors like cyclicality, domestic sentiment, and international market dynamics to make informed decisions.
