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Stock markets defy Middle East conflict: DAX starts with profits
Financial markets show little reaction to Middle East escalation. Stock markets stable, dollar stronger. Find out more in our article.
Stock markets defy Middle East conflict: DAX starts with profits
Despite widespread fears of an escalation of armed conflict in the Middle East, European stock markets were unimpressed. At the beginning of the trading week, the Dax in Frankfurt rose by 0.7 percent to 18,060 points, while the European leading index Euro Stoxx 50 rose to the same extent. In contrast, Asia's major indices, Japan's Nikkei and Hong Kong's Hang Seng, each ended 0.7 percent lower.
In the previous two weeks, the Dax had recorded a slight correction after a lengthy upward trend. On Monday, a buy recommendation for the shares of the sporting goods manufacturer Adidas by Morgan Stanley led to the company rising to the top of the DAX winners. The arms manufacturer Rheinmetall also recorded an increase of over 1 percent, bringing it closer to its recently achieved record price of around 561 euros.
In addition to the stock markets, stock market investors also focused on the price of oil and the dollar due to the escalating situation in the Middle East. Crude oil prices remained stable on Monday after rising above $92 on Friday due to tensions in the Middle East. The Strait of Hormuz remains crucial to oil prices, particularly whether shipping in the area will be affected.
In the currency markets, the US dollar gained in value against the euro and other currencies. This development is typical in phases of increasing risk aversion on the financial markets. The strength of the dollar is mainly due to different inflation and key interest rate expectations between the USA and the euro area. While inflation in the euro area has decreased and is moving closer to the European Central Bank's targets, inflation in the USA is proving to be more stubborn.
Analysts expect the US Federal Reserve Bank (Fed) to cut interest rates in July at the earliest. These assessments have reduced significantly compared to the beginning of the year, which is helping to strengthen the US dollar. The difference in key interest rates between the USA and the euro area as well as the yields on government bonds encourage investors to invest more of their money in the dollar area.