Inflation scare shakes German stock market

The German stock exchange suffered drastic losses on Tuesday after consumer prices in the USA came in higher than expected, unsettling the markets. The DAX lost 0.92 percent of its value, while the MDAX recorded even steeper losses of 1.42 percent. Jürgen Molnar, capital market strategist at Robomarkets, had already highlighted in advance that the inflation data from the USA could significantly influence stock market prices, as they substantially affect the monetary policy decisions of the Federal Reserve. Meanwhile, the sword of Damocles of unmet hopes for a prompt and significant interest rate cut hung over investors, as the latest figures reported a decline in inflation to 3.1 percent, rather than the forecasted 2.9 percent. Experts like Tobias Basse of NordLB state that only a clearer macroeconomic outlook could provide the Fed with the opportunity to cut the prime rates, with current serious issues at US regional banks potentially prompting a faster adjustment of interest rates. Technology stocks, which are particularly sensitive to changes in interest rates, were under strong selling pressure. Infineon, a semiconductor manufacturer, experienced a sharp setback at the bottom of the DAX, with a minus of five percent. In contrast, Rheinmetall shares continued to thrive and maintained their rally at the top of the DAX with a gain of 4.6 percent, driven by political discussions about a massive increase in the German military's defense budget. A similar trend was observed in the MDAX, where Hensoldt, as the top winner, gained 5.7 percent. The stock market newcomer, Renk, surprised with a gain of over 15 percent. Meanwhile, Siltronic had to absorb losses of four percent following poor demand forecasts and the announcement of a reduced dividend to the public. On the recovery track, however, were Norma Group in the SDAX, which added 1.6 percent, and Thyssenkrupp Nucera, which rose by 4.7 percent following positive business figures. The broader European market also felt the impact of inflation worries, with the EuroStoxx 50 falling by 1.20 percent. The national indices in Paris and London both edged down slightly. Meanwhile, a decline in the Dow Jones was observed on Wall Street. The euro was weighed down on the foreign exchange market by the US inflation data, falling to a rate of 1.0717 US dollars, while the European Central Bank had previously set the official reference rate at 1.0793 dollars. The bond market showed no change in the yield on public bonds, which remained at 2.38 percent. Market sentiment remains tense, as investors must continue to consider global economic developments and political signals for their future strategic decisions.