DAX Index Daily Price Forecast – Cues From International Market To Drag DAX on Bear’s PathFed forward guidance stocked fears of U.S economy’s recession once again influencing a bearish rout in major global equity markets.
Germany equities were higher at the close on Wednesday, as gains in the Media, Software and Telecoms sectors propelled shares higher. At the close in Frankfurt, the DAX gained 0.24%, while the MDAX index gained 0.24%, and the TecDAX index added 0.64%. Advancing stocks outnumbered falling ones by 356 to 353 and 70 ended unchanged on the Frankfurt Stock Exchange. The DAX volatility index, which measures the implied volatility of DAX options, was down 3.90% to 20.46. Italy said it reached a budget-deficit deal with the European Union late Tuesday, a deal that the union reportedly confirmed Wednesday. The agreement would let the Italian government sidestep any disciplinary measures by the EU which added to positive sentiment helping German indices close positive for the day.
Fed Forward Guidance Renewed Market Fears on Curve Inversion in US T.Yields
Asian shares retreated on Thursday after the U.S. Federal Reserve raised rates, as expected, and kept most of its guidance for additional hikes next year, dashing investor hopes for a more dovish policy outlook. The latest forward guidance from fed cause US Wall Street to take on bearish price action as it renewed fears of curve inversion. Analysts believe that the short-term bond yields could rise sharply, leading to a faster drop in the spread between the 10-year and two-year Treasury yield owing to fed forward guidance. U.S. stocks are on pace for their biggest December decline since 1931, the depths of the Great Depression.
The gradual tightening of monetary policy has been the driving force behind recent market volatility. With corporate borrowing and spending still high and the Fed continuing to reduce its balance sheet, volatility will remain relatively high as long as tightening continues. As fear over economic slowdown hits market while boost from tax cuts is waning in US markets, investors are flocking to the safety of government bonds. A rise in short-term interest rates and a fall in the long-date yield will be interpreted as clear sign of weak economy and German markets which are highly susceptible to changes in US markets are expected to trade downtrend during Frankfurt market hours today. DAX futures trading in international market ahead of European market hours was down by nearly 1.41% on the day clearly hinting at bearish market sentiment.