Dax under pressure
Stock markets are plummeting
1/24/2022 5:34 p.m
The new week on the stock market starts badly, with prices falling significantly worldwide. Investors hope that things will calm down on Wednesday – and that there will be clarity about the US Federal Reserve’s monetary policy.
The stock markets are going down worldwide. In Frankfurt, the leading index Dax temporarily plummeted by up to 4 percent, then recovered somewhat. On Wall Street, the S&P 500 lost 2 percent. The technology exchange Nasdaq was also under land.
The stock markets have been under pressure for days. Since the beginning of the year, the S&P 500 has lost almost 10 percent, and the Nasdaq 100 has lost almost 14 percent. Since then, the Dax has lost more than 5 percent.
Two main reasons are given for this: Firstly, the US Federal Reserve is preparing the markets for an interest rate turnaround in view of the high level of inflation. Rising interest rates make stocks less attractive compared to other asset classes. Tighter monetary policy also dries up liquidity in the market.
It is currently assumed that the first step will take place in March. How drastic it will be is not known. There is also speculation about how many rate hikes will take place this year. The Fed will provide information on future monetary policy tomorrow.
The second reason is the Russian troop deployment on the border with Ukraine. In the event that Russia attacks the neighboring country, the US, Great Britain and the EU have announced economic sanctions. The Ukraine issue will weigh on the markets for the foreseeable future, “until there is some kind of solution and more clarity on how things will turn out,” said Darren Schuringa, head of asset manager ASYMmetric ETFs.
Cryptos are losing heavily
The current sell-off is not limited to individual titles, but affects the entire market. It also looks like many investors are taking advantage of any price gains to sell shares.
“The risk mix of geopolitical tensions, a rising oil price and the prospect of continued high inflation rates and higher interest rates means that investors are currently avoiding stocks,” said analyst Jochen Stanzl from the online broker CMC Markets. The volatility indices VDax and VStoxx, which measure investors’ nervousness, rose by up to 21 percent.
The Russian stock market is also going downhill. Moscow’s leading index fell by more than eight percent – the biggest slide since the Corona-related stock market crash in March 2020. The Russian currency ruble also came under pressure.
The fact that investors are reducing the risk is also shown in the crash of the cryptocurrencies. Bitcoin and Ethereum slipped by up to 15 percent and were trading at the level of six months ago. The “anti-crisis currency” gold, on the other hand, rose somewhat in price. Other “safe havens” such as government bonds were also in demand.