Following recent monetary policy adaptations from some of the largest economies across the globe, German stocks faced a downturn on Friday, with the prominent DAX index slipping 1.49% into negative territory. Market analysts seem to be processing the ramifications of the new interest rate decisions made by key central banks in the previous fortnight.
However, the implications of these monetary policies are proving to be rather persistent, prompting a shift in focus toward anticipated future decisions regarding interest rates. According to insights from BofA Global Research, "A faster Fed cycle doesn't affect our ECB call: we anticipate 25 basis point cuts this year, the return to a 2% deposit rate by September 2025 (with an increase in risk to July) and a 1.5% deposit rate by 2026.
The crucial factors pushing the European Central Bank (ECB) into accelerated action will be an inflation undershoot and/or additional economic weakness. The seasonally adjusted inflation data for August provides us with the comfort that we will reach this point." In other economic developments, consumer sentiment in the eurozone witnessed a slight improvement, with the confidence index rising by 0.5 percentage points to -12.9 for September, as suggested by preliminary data from the European Commission.
Analysts had forecast a slightly more negative reading, expecting the index to land at -13 points for the month. Domestically, Germany's producer prices for industrial products exhibited a year-over-year decrease of 0.8% in August, a figure that remained constant compared to the previous month, according to data released by the Federal Statistical Office.
Destatis attributed this anticipated decrease primarily to falling energy prices, reflecting broader trends in the market. On the corporate side of the spectrum, Commerzbank ($CBK) has found itself at a crossroads, as the bank’s works council has conveyed a "bitter determination" to obstruct a merger with the Italian banking entity UniCredit.
This statement comes from Uwe Tschaege, the head of the works council, and underlines the labor representatives' concerns regarding the potential job losses the merger could precipitate, predicting a reduction of two-thirds of the lender's workforce. At market close, shares of Commerzbank increased by 0.48% on Xetra, despite the ongoing merger discussions. Additionally, Mercedes-Benz Group ($MBG) experienced the second-steepest drop among German blue-chip enterprises, with shares plummeting 6.81%.
This decline followed a cautionary note from the car manufacturer about a significant year-over-year drop in EBIT for the complete fiscal year of 2024, a stark revision from the previous forecast which suggested merely a minor downturn in earnings performance..