German stock market starts with gains – look at US interest rate decision and oil prices

Despite the nervousness ahead of the eagerly awaited interest rate decision in the USA, the German stock market started today with moderate gains. At the start of trading, the DAX gained almost 0.5 percent to 25,517 points. Bargain hunters are apparently ready to get in again, according to retailers. The leading German index had already stabilized somewhat on Tuesday after the losses at the beginning of the week.

According to experts, many investors are betting that the interest rate decision by the US Federal Reserve (Fed) and a possible new price cap for energy will bring calm back to the trading floor. Chancellor Friedrich Merz had announced that he would provide relief in view of the high fuel prices. However, the “exact instruments” have not yet been determined.

Falling oil prices are also having a supporting effect and are not continuing the highs seen in recent trading days for the time being. The price for a barrel of Brent crude oil from the North Sea for delivery in November fell by a good 0.7 percent to just under $108 this morning.

US Energy Secretary Chris Wright had promised that an important oil pipeline in Saudi Arabia would be put into operation quickly. The east-west pipeline, which was shut down after drone attacks by the Houthi rebels, will be back in operation “very soon”. "This will be a short and temporary disruption. It will be measured in days," he told US broadcaster CNBC.

The East-West pipeline is of great importance for the oil market because it can bring large quantities of oil from the Persian Gulf to the Red Sea bypassing the effectively blocked Strait of Hormuz.

However, no major price gains in the DAX are expected today. In view of a robust labor market in the USA and inflation fueled by the war in the Middle East, investors are firmly expecting the Fed to raise interest rates by 25 basis points to a range of 3.75 to 4.00 percent. According to the CME Group's FedWatch tool, the probability of this happening is estimated at 92.4 percent.

At his third interest rate meeting, new chairman Kevin Warsh could raise key interest rates for the first time. According to strategists, the decisive factor will be how he assesses the inflation risks and whether further interest rate increases are in prospect. “This outlook has the highest potential for surprises and will relentlessly dictate the final direction for the European stock markets for the rest of the week,” says ActivTrades analyst Frank Sohlleder.

Higher interest rates are generally bad for stock markets because bonds become more attractive and companies' financing costs rise. It would be the first increase in the US in more than three years. In advance, the yield on ten-year government bonds climbed above the five percent mark and reached its highest level since 2007. As a result, all indices on the New York stock market closed in the red on Tuesday.

The Asian stock exchanges, on the other hand, rose today. They were reacting to the slight decline in oil prices. However, before the US interest rate decision in the evening, the increases remained manageable. Japan's Nikkei 225 recovered 0.7 percent to 63,923 points. South Korea's Kospi rose 1.4 percent and the Australian index rose 0.3 percent to 8,697 points. The Chinese stock exchanges also rose slightly.

Meanwhile, Bitcoin is under pressure: the price of the largest cryptocurrency temporarily fell by up to five percent in the evening to below $75,000 - this is its lowest level since August. The trigger was that US President Donald Trump and his Republicans in Congress suffered a severe defeat. The Senate blocked a bill to regulate cryptocurrencies. It should create a legal framework for digital assets.

Audi boss Gernot Döllner wants to reorganize the Ingolstadt-based car manufacturer internally in view of the industry crisis and the pressure to save money in the Volkswagen Group. “We will need more compact organizations, faster processes and faster decisions,” said the manager of the Augsburger Allgemeine. The future cannot be shaped by saving alone. “We are witnessing a fundamental disruption to our industry,” he added. Audi is in a phase in which efficiency needs to be significantly increased and the business model needs to be further developed at the same time.