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Record inflation: Stock exchanges suffer price losses around the world

Record inflation
Stock exchanges suffer price losses around the world

The stock market crash continues. Inflation and interest rate hikes are causing heavy losses. It doesn’t look like it will change anytime soon.

The new trading week starts the way the old week ended: with price losses. Improvement is not in sight. In the face of high inflation, the turnaround in interest rates and the related fears of recession, the global decline in prices continues.

DAX 13,462.30

The Dax fell by 1.7 percent to 13,522 points in the morning. For the main German index, the May low of 13,380 points is approaching. Losses from a week-ago interim high now stand at 7.4%. The European Stoxx 600 fell 1.6%, hitting its lowest level since the beginning of March.

“Interest rates and inflation remain the market’s bogeys,” says Thomas Altmann of wealth manager QC Partners. On the one hand, rising interest rates have a direct impact on corporate profits. And on the other hand, that would make bonds increasingly competitive for interest-free stocks.

Things went badly in Asia too. Expressed in figures: Japan’s Nikkei index lost a solid 3 percent to 26,987 points, the broader Topix index fell 2.2 percent. The Shanghai stock exchange loses 1.1 percent, the index of the most important companies in Shanghai and Shenzhen loses 1.4 percent. In the US, the major Dow Jones, S&P 500 and Nasdaq 100 indices also lost strongly at the end of last week.

Futures point to further downside with US equities opening this afternoon. The S&P 500 is down 2.1% and the Nasdaq 100 is down 2.5%.

The Fed will raise interest rates

The latest price drop was triggered by US inflation data. As a result, the inflation rate rose to 8.6 percent in May and thus to its highest level in more than 40 years. Furthermore, consumer sentiment in the United States had fallen to its lowest level since 1980 amid high inflation. Decreasing consumer spending and rising interest rates are raising concerns that the US may slide into a recession. Private consumption accounts for two thirds of the gross domestic product of the world’s largest economy.

“After the US inflation rate dropped in April, speculation about hitting the peak increased,” Commerzbank analyst Christoph Balz wrote. With the renewed increase, this has been done. High inflation could force central banks like the US Fed and the ECB to raise interest rates ever faster than previously planned. This could slow the economy down.

The next Fed interest rate meeting is on the agenda on Wednesday, at which a further tightening of monetary policy is expected to be agreed. The deciding factor, however, is whether currency controls will increase the pace even more than expected. In early May, the Fed made its largest interest rate hike in 22 years and raised its benchmark interest rate by half a point to the new range of 0.75 to 1.0 percent. .

Fed Chairman Jerome Powell reported similar increases for Wednesday and July meetings. “Inflation and interest rate expectations are again supported, especially as oil prices are still unexpectedly high and gasoline prices have developed further upward momentum in recent weeks,” says Ralfcircul, analyst at Landesbank Hessen-Thüringen. .

The Ministry of Economy warns of bottlenecks in deliveries

That’s not all: after a corona outbreak was detected in Beijing’s most populous district, Chaoyang, authorities announced mass testing. It is very likely that another lockdown will follow, which this time will paralyze much of the Chinese capital.

According to the Federal Ministry of Economy, the Chinese government’s zero-Covid strategy still poses risks for the German economy despite the easing. “Although there have recently been far-reaching eases in Shanghai,” the monthly report released today said. “But if there are blockages of this magnitude again in China, a worsening of supply bottlenecks and a further slowdown in world trade cannot be ruled out.” This should also be felt here in Germany, after all, China is by far Germany’s most important trading partner.

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