Now that the US Federal Reserve has adjusted its inflation target, investors are turning their eyes to next Thursday's ECB meeting. Will Europe's central bankers follow suit? That could give the stock market a new boost after the recent price decline.
In the face of less economic data, the central banks are likely to determine the market situation again in the coming stock market week. Problem topics such as the coronavirus, the US election campaign, the Brexit negotiations or the trade dispute between the US and China are marginalized, at least for the time being.
This Thursday the European Central Bank (ECB) announced its key interest rate decision. Some experts believe it is possible that the eurozone's monetary authorities could follow their colleagues in the US who want to break new ground with their inflation target in the future.
US chief monetary watchdog Jerome Powell had declared at the annual central bank meeting at the end of August that the Fed intends to allow more flexibility in the future with its inflation target, which it has previously manifested. Accordingly, the US Federal Reserve wants to temporarily allow higher inflation if the target of two percent has previously been undercut for a long time. This announcement had been seen on the stock and financial markets as a strong sign of a sustained loose monetary policy.
ECB chief economist Philip Lane had once again encouraged speculation that further monetary policy easing could also be on the table in Europe when he described the effect of the previous measures on short-term interest rates as inadequate. The US Federal Reserve's change in strategy was already responsible for the fact that the US stock exchanges experienced a strong boost before the sharp correction on Thursday and Friday, stated expert Claudia Windt from Hessische Landesbank (Helaba).
Last week, the leading German index Dax climbed to a new high at 13,460 points since the February record before the Corona crash. After that, however, he fell back significantly. On Friday, the Dax closed with a daily minus of 1.65 percent at 12,842.66 points. The MDax slipped below the 27,000 mark, it said goodbye to the weekend with a minus of 1.18 percent to 26,901.86 points.
Are the bargain hunters coming now?
Whether the Fed is now also serving as a model for the ECB and can thus give the markets new impetus is disputed: Helaba expert Ulf Krauss does not see the ECB under acute pressure to act: "If the ECB Council meets again after the summer break, it will presumably decided to wait for further developments. Developments refer to the course of the pandemic, the economy and inflation as well as movements in the financial markets. " Robert Halver from Baader Bank, on the other hand, is certain that the ECB will adjust to the Fed's course. "The creation of a symmetrical inflation target is needed, which also averages just two percent," wrote the market expert.
But first of all, the optimists on the stock market will probably face a real mood test in the coming week, believes Chris-Oliver Schickentanz, Commerzbank's chief investment strategist. He points to the recent sharp rise in fluctuations on the stock exchanges and the sudden end of the rally in US technology stocks such as Tesla, Apple & Co, where the hangover mood had recently set in due to ultra-high valuations.
A setback in prices is possible, but a trend change in stocks is not in sight, said Schickentanz. "We assume a dominance of the 'bargain hunters', which is supported by the good economic data and an overall more positive picture of the corona pandemic." In addition, there is always renewed hope for progress with corona vaccines.
Meanwhile, apart from the ECB, the economic agenda has little to offer investors. Production data from Germany on Monday should provide information on the extent to which the industry in this country is continuing to recover from the Corona crisis. On the same day, China released its trade balance for August. On Thursday, in addition to the ECB's press conference, the focus will be on the US labor market with the weekly initial jobless claims. On the company side, the detailed key figures from Dermapharm will be available on Wednesday and those from Knorr-Bremse on Thursday. In addition, the announcement of a decision in the year-long legal dispute between the car manufacturer Daimler and the supplier Prevent is planned for Thursday.
. (tagsToTranslate) Economy (t) Dax (t) Stock analysis (t) ECB