German shares experienced further declines on Thursday as the European Central Bank (ECB) decided to maintain interest rates, a move that was widely anticipated. The central bank, while retaining a cautious and data-driven approach for upcoming monetary policy decisions, has announced that the blue-chip DAX index closed the day down by 0.45%.
The ECB's Governing Council made the decision to keep the interest rates on the main refinancing operations at 4.25%. Additionally, the marginal lending facility and the deposit facility remained unchanged at 4.50% and 3.75%, respectively. This decision underscores the ECB's emphasis on the necessity of a restrictive monetary policy in light of ongoing significant domestic price pressures.
Furthermore, inflation is projected to stay above the target level for an extended period, likely extending into 2025. Mark Wall, Chief European Economist at Deutsche Bank Research, provided insights into the ECB’s approach, stating, "The ECB remains on course for a second rate cut in September. Although recent inflation data appears less favorable, the ECB has attributed some of these fluctuations to one-off events and suggested that others are being absorbed within profit margins.
The bank seems to be taking a broader view on trends while adhering to its commitment to a data-dependent, rather than data point-dependent, strategy." In corporate news, major automotive players such as Mercedes-Benz Group ($MBG) and Stellantis are reportedly in negotiations with the Serbian government to explore investment opportunities in what may become the largest lithium mine in Europe.
This development was confirmed by Bloomberg News, which cited anonymous sources familiar with the discussions. These sources indicated that executives from both companies might sign letters of intent regarding the investment during their visit to Serbia on Friday. Following this news, Mercedes-Benz recorded a gain of 1.66% at the close on Xetra. Meanwhile, Merck KGaA ($MRK.DE) announced its plans to acquire Unity-SC, a French company specializing in metrology and inspection tools for the semiconductor sector.
The acquisition deal is valued at 155 million euros, with additional milestone-based payments expected. Despite this positive corporate development, Merck KGaA saw a decline of 1.29% in its shares at the end of the trading session..