Market report: Interest rate uncertainty dampens Wall Street

On Wall Street, as before in Europe, investors kept a low profile in the run-up to the central bank’s forthcoming interest rate decision. However, there was movement in the crypto sector.

The approaching US interest rate decision kept Wall Street locked in a tight trading range again today. The fluctuations of the major indices remained manageable throughout the day. In the end there were easy wins.

The Dow Jones index, the leading index of the standard stocks, ended trading at 33,573 points, a total of nine points slightly higher. The technology exchange Nasdaq rose by a good 0.3 percent, as did the market-wide S&P index, which gained 0.2 percent.

The US stock exchanges had ended the past week on a friendly note thanks to the relief at the settlement of the US debt dispute. Since then, the uncertain economic prospects and the expected interest rate decision by the US Federal Reserve have increasingly been the focus of interest.

“Investors continue to wrestle with the question of whether the US Federal Reserve will briefly interrupt its series of interest rate hikes or pause it for a longer period,” said investment advisor Paul Nolte of wealth manager Murphy & Sylvest. Until next week’s Fed meeting and the US inflation data the day before, many of them are expected to keep their feet still. Experts expect a slight decline in inflation and unchanged key interest rates for the time being.

There was a lot of movement in the crypto sector. Because one day after the lawsuit against the world’s largest crypto exchange Binance, the US Securities and Exchange Commission is now also dragging rival Coinbase to court. The company operates an unlicensed trading platform, SEC boss Gary Gensler wrote on Twitter today. This deprives Coinbase investors of important protection against fraud and manipulation.

The shares of the crypto exchange slumped by up to 20 percent on Wall Street, ending with a big minus of 12.1 percent. The cyber currencies Bitcoin and Ethereum reacted with volatile trading.

The lawsuits are part of Gensler’s program to get a grip on the largely unregulated Internet foreign exchange market. So far, according to him, “Wild West methods” have prevailed there. Numerous US states are also going to court for alleged violations of securities laws.

Expert Mark Palmer from Berenberg Bank reacted with little surprise today, because he had been pointing out the risk of an SEC lawsuit against Coinbase in studies since May. “A significant portion of revenue is at stake because of the continued crackdown on the crypto space by US regulation,” the expert emphasized.

However, Coinbase and other crypto companies have repeatedly criticized that the rules are unclear. In addition, the SEC is overstepping its powers by claiming to monitor the industry.

Apple shares, which hit a new record high of $184.95 the day before, had a tough time today. In the end, the paper limited initial losses of more than one percent, but with a closing price of $ 179.21 there was no euphoria. It was a slight daily loss of 0.21 percent.

This is after Apple presented its long-awaited data glasses at the WWDC developer conference the night before – after all, the first new product category in nine years. The headset can show digital objects in the real environment on its displays.

Two hours before the market close today, Boeing investors were surprised by bad news. The announcement that deliveries of the long-haul jet 787 were being delayed due to new production problems suddenly pushed the shares of the aircraft manufacturer contained in the Dow down by almost four percent in the first reactions. Before the report, the price was still stable in the plus. Most recently, however, the pressure to sell was put into perspective again, and the share lost 0.71 percent in the end.

Faulty parts were discovered during the production of the aircraft, also known as the “Dreamliner”. The error could also affect about 90 already built Dreamliners that the company has not yet delivered, Boeing said. Production will not be stopped, however, since adapted parts are to be installed in a timely manner. Boeing is also sticking to the goal of delivering 70 to 80 of these wide-body aircraft this year

The DAX moved within a narrow range today and ended up slightly higher. Investors continued to focus on the 16,000 point mark and even managed to surpass it slightly in the meantime. The daily low was 15,925 points.

In the end, the leading German index closed at 15,992 points, a moderate daily gain of 0.18 percent. The market remains at a high level, but there is currently a lack of strength in the run-up to important central bank decisions in the coming week.

“The DAX is stuck in a consolidation and there is a lack of any impetus, which applies equally to both directions,” says Konstantin Oldenburger, market analyst at CMC Markets. According to his estimates, the almost lethargic mood on the stock exchange should continue at least until the central bank meetings in the USA and the euro zone in the coming week.

Both the US Federal Reserve (Fed) – on June 14 – and the day after that the ECB will decide on further rate hikes next week. In the run-up, investors remain paralyzed, which is not unusual. Especially since new inflation figures are also expected in the United States on June 13th.

“The coming week should be very interesting when it comes to interest rate policy,” says Christian Henke of IG Markets. “The US inflation data will be released one day before the FOMC meeting on June 14. If the rate decline continues, the Fed could consider an interest rate pause, speculation is currently going on on Wall Street. Recently somewhat weaker economic data speak against a further tightening, but the development of inflation is likely to be decisive.

In the euro zone, on the other hand, only a few optimists are currently expecting interest rates to pause. Yesterday, ECB President Christine Lagarde raised the prospect of further interest rate hikes before the Economic and Monetary Affairs Committee of the European Parliament.

According to the head of the Dutch central bank, Klaas Knot, the ECB must further tighten its interest rate policy. This must continue “as long as necessary” until the return of inflation to the ECB’s medium-term target of two percent is foreseeable, said Knot. “But we will do it step by step,” he added. The tighter monetary policy becomes, the greater its effect.

Incoming orders from German industry have a negative impact on investors. In April, she surprisingly had to put up with another drop in orders. Orders fell surprisingly by 0.4 percent compared to the previous month, as reported by the Federal Statistical Office.

“Despite the slump in March, incoming orders did not recover in April, contrary to expectations,” commented Commerzbank chief economist Jörg Krämer. That is a bad signal. “The technical recession in the winter half-year was not a slip-up.” Together with the global interest rate hikes, there are many indications that the German economy will shrink again in the second half of the year. Chief economist Alexander Krüger from the Hauck Aufhäuser Lampe private bank described the data as a huge disappointment: “This makes the economic feeling more and more queasy.”

The euro gave up initial modest gains today and weakened slightly. The common currency was last listed in US trading at 1.0691 dollars and thus slightly lower than the previous evening. The European Central Bank (ECB) set the reference rate at 1.0683 (Monday: 1.0690) dollars.

A survey by the ECB, according to which consumer inflation expectations in the euro zone fell noticeably in April, attracted market attention. Consumer perceptions of inflation and uncertainty about future inflation also fell. In recent months, the high inflation has already tended to fall, in May it was 6.1 percent.

Oil prices have now limited stronger losses over the course of today, but remain in the red. A barrel of North Sea Brent and US light oil WTI cost around one percent less. Yesterday, prices were initially supported by the announcement of a significant cut in production by the oil giant Saudi Arabia. However, the effect quickly wore off.

The previously turbulent meeting of the OPEC+ oil alliance apparently left its mark on the market. There should have been major debates about the production quotas of the African Opec countries. In addition, the other OPEC countries did not make any additional production cuts of their own.

Among the individual stocks, the Merck share was in demand. The Darmstadt-based pharmaceutical and technology group is sticking to its broad base and is not planning any major takeovers in the pharmaceutical business. “I believe that diversification is an absolute strength,” said Merck CEO Belen Garijo in the evening at the International Club of Frankfurt Business Journalists (ICFW).

Support for this strategy also comes from the founding family Merck, which still holds around 70 percent of the shares in the company. This gives the group enormous stability. “The owners want to retain a diversified company that operates in three attractive markets.”

Zalando, on the other hand, was at the bottom of the index. Zalando has lost over 5.0 percent in the last two trading days – after a negative analyst opinion from JP Morgan. Analyst Georgina Johanan is skeptical about the development of the online fashion retailer. According to the expert, Internet access data and indicators for brand dynamics show a slowdown in business dynamics in Germany in May.

The armaments group Rheinmetall is preparing more tanks for transport to Ukraine. The DAX company announced in the evening at its production site in Unterlüß (Lower Saxony) that it had received an order from the Federal Ministry of Defense for 20 Marder infantry fighting vehicles.

The vehicles are to be delivered to the country attacked by Russia by the end of July. 40 Marders have already been delivered, 20 of them from Rheinmetall and 20 from Bundeswehr stocks. Rheinmetall also offers 60 other martens that still need to be processed.

Commerzbank starts with the announced buyback of its own shares. From June 7th to July 31st at the latest, she wants to buy back her own papers worth up to 122 million euros on the market. The repurchased shares would then be retired. After the multi-billion dollar rescue by the German state in the 2008/2009 financial crisis and expensive restructuring programs, Commerzbank had again made billions in profit in 2022. This year it should be even more.

The sale of the Thyssenkrupp marine subsidiary is apparently taking shape. “The process is ongoing,” said a company spokesman for a report in the “Frankfurter Allgemeine Zeitung”. This had written that the data rooms for investors would be opened shortly. As the Reuters news agency learned in April from a person familiar with the matter, the head of Thyssenkrupp Marine Systems (TKMS), Oliver Burkhard, has held a series of talks with potential buyers over the past few weeks.

Deutsche Börse is including the shares of drug researcher Evotec, bottling plant manufacturer Krones, Software AG and Shop Apotheke Europe in the MDAX stock exchange index for medium-sized stocks.

As of June 19, the real estate group Aroundtown, the telecommunications provider United Internet, the wafer manufacturer Siltronic and the US telecommunications supplier Adtran have to give way, Deutsche Börse announced. As expected, there will be no changes in Frankfurt’s leading index DAX.