Weekly outlook: “Interest rate cuts not a turbo, but helpful”

After a very weak start to the “anxiety month” of September, things have been looking better since last Thursday. Confidence also prevails for the third week of September. The highlight: the US Federal Reserve meeting on Wednesday.
 

16. September 2024. FRANKFURT (Börse Frankfurt). EThe central bank meetings continue: On Wednesday, the US Federal Reserve will most likely cut interest rates - for the first time in five years. There is only speculation as to whether it will be a large or small step, i.e. 0.25 or 0.50 percent. The Bank of England and the Bank of Japan are also meeting this week. Last week, the ECB cut its key interest rates.

However, the DAX is down slightly at 18,640 points on Monday morning after closing at 18,699 points on Friday. The data from the USA is actually good. Both the S&P 500 and Dow Jones as well as the Nasdaq made significant gains of around 4 and 6 percent on Friday.

“The more positive mood on the stock markets could continue,” says Thorsten Weinelt from Commerzbank. Statistically speaking, the turnaround in interest rates has frequently given the leading US market new momentum - but only in the absence of a recession. However, seasonally weaker weeks lie ahead, which could be punctuated by profit warnings from companies. “This is likely to make new all-time highs more difficult in the short term,” says Weinelt. In addition, the big expiry day on Friday brings potential for volatility.

“Fine line between hopes of interest rate cuts and fears of growth”

“Even if the negative signs in the month of fear in September have not yet completely disappeared, they have at least become smaller,” notes Markus Reinwand from Helaba. Equities continued to walk a fine line between hopes of interest rate cuts and fears of growth. “The majority of economic data around the world is still surprisingly negative, leading to growth concerns or even fears of recession,” he explains. However, the proportion of negative economic surprises is now decreasing. In addition, the inflation data is still slightly below expectations overall. This means that the fantasy of interest rate cuts remains intact and is supporting the stock markets. “Interest rate cuts are not a turbo boost for the stock market, but they do help in an otherwise difficult environment.”

“Weakness until the end of September”

“The trend reversal statements or even panic expectations that have been circulating in some quarters have not been confirmed,” comments chart technician Christof Geyer, speaking of a ‘corrective movement in the existing upward trend’. However, he warns against carelessness. Even if the indicators have already generated buy signals, the current movement will probably not go much further than the resistance zone. “The seasonal factors still indicate weakness until the end of September,” emphasizes Geyer. The time until then could be used to pick up quality stocks cheaply. “The period from the beginning of October is likely to be turbulent, as the typical year-end rally starts at the beginning of October.”

Gold price rises and rises

The constant new highs for gold, most recently 2,589 US dollars, are striking. This represents an increase of 25 percent since the beginning of the year. DZ Bank has raised its gold price forecast. Increased demand from central banks is one of the reasons for the constant new highs. As a non-interest-bearing investment vehicle, gold is also benefiting from the prospects of falling key interest rates and bond yields. “In the long term, the gold price should reach the USD 2,800 mark,” explains analyst Thomas Kulp.

Important economic and business events of the week

Monday, 16 September 

China, Japan, South Korea: Stock exchanges remain closed for the holiday.

Tuesday, 17 September 

11.00 am. Germany: ZEW economic index September. The economic development in Germany is a complete disappointment, explains DekaBank. Accordingly, the ZEW assessment of the situation is likely to deteriorate further. Expectations, on the other hand, are likely to remain stable at the reduced level.

2.30 pm. USA: Retail sales August.

3.15 pm. USA: Industrial production August.

Wednesday, 18 September 

8.00 pm. USA: Interest rate decision US Federal Reserve. Analysts and market participants expect an interest rate cut, notes Deutsche Bank. Whether this will be 0.25 or 0.5 percentage points, however, is not yet certain in view of the futures markets. Inflation and labor market data, however, point more towards 0.25 percentage points.

Thursday, 19 September 

1.00 pm. Great Britain: Interest rate decision by the Bank of England. According to DekaBank, the Bank of England will now leave the prime rate unchanged after the first interest rate cut in August. However, it may already be preparing the next interest rate cut for November.

Friday, 20 September 

Major expiry day for options and futures. Futures and options contracts on the DAX as well as futures and options on individual shares expire on the Eurex derivatives exchange. Contracts on other indices, international equities, commodities, currencies, etc. also expire. On this day, there may therefore be a high trading volume and sharp fluctuations in the prices of securities.

Japan: Interest rate decision by the Bank of Japan. According to DekaBank, there is little doubt that the next interest rate move by the Bank of Japan will be an increase. This time, however, the key interest rate will remain unchanged at 0.25 percent.

Saturday, 21cSeptember 

9.00 am to 5.00 pm. One-day seminar for women: On the stock market, get set, go! Financial planning, investment and retirement provision (online). More information: https://www.boerse-frankfurt.de/finanzen-fuer-frauen

From Anna-Maria Borse, 16 September 2024, © Deutsche Börse AG

Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.

Feedback and questions to redaktion@deutsche-boerse.com