DAX under pressure before Fed interest rate meeting: oil price and AI concerns weigh on markets

Before the start of Xetra trading, the broker IG valued the DAX 0.2 percent lower at 25,395 points. From a chart perspective, the proximity of the 100-day line is significant. The moving average is currently at 25,230 points. Below that, the psychologically important mark of 25,000 points would come into focus.

Yesterday, the leading German index ended trading with a loss of 0.5 percent to 25,440 points. Rising oil prices and new concerns about the risks of artificial intelligence (AI) weighed on investor sentiment.

As usual, investors are particularly keeping an eye on the price of oil. On the raw materials market, Brent crude oil from the North Sea rose in price by 1.6 percent to $107.40 per barrel (159 liters). US oil WTI was 1.7 percent higher at $103.15.

"The market environment is likely to remain challenging in the coming weeks: geopolitical risks, higher energy prices, the resilience of the AI ​​investment cycle and fluctuations in the bond markets could repeatedly test investor sentiment," comments Ulrich Stephan, chief investment strategist for private and corporate clients at Deutsche Bank.

In August, the DAX surpassed the 26,600 point mark for the first time. Recently, however, it has moved more than a thousand points away from its record high. And the situation remains critical: inflationary pressure is increasing, and many central banks are reacting by raising interest rates in order to curb inflation. Higher interest rates put a strain on the stock market and dampen the economy.

That's why investors have been looking forward to tomorrow's interest rate meeting by the US Federal Reserve for days. Most investors and experts expect interest rates to rise. “US consumer prices have strengthened the expectation that the Fed will increase the key interest rate range,” write the experts at Dekabank. The exciting question will be whether there will be an interest rate increase this year.

The specifications from the USA are weak for today's trading day. Warnings about the dangers of artificial intelligence (AI) and rising bond yields pushed back major indices on Monday. The US standard value index Dow Jones lost 0.3 percent to 52,421 points. The technology-heavy Nasdaq fell 0.6 percent to 26,186 points and the broad S&P 500 lost 0.5 percent to 7,620 points.

The bond market also sent crisis signals. The yield on ten-year US government bonds briefly exceeded the five percent mark. This was the first time since 2023. “The fact that the ten-year yield is rising above five percent is enormous and speaks volumes,” said Jake Dollarhide, head of asset management company Longbow Asset Management. This could put pressure on the Fed to raise rates more than once.