The DAX, which managed to climb above the 13,500 mark before the inflation data in the US on Tuesday, is now in the red and the low for this year is dangerously close again. On Wall Street, the Dow Jones Industrial Average plummeted by 1,400 points after the figures, ending the day with the darkest trading day since June 2020.
This is even though overall inflation in the US has continued to fall, from 8.5 to 8.3 percent. The continuing rise in the core rate of inflation, from which volatile energy prices are excluded, worries investors because it shows that prices are rising right across the economy.
Stubborn inflation is unlikely to dissuade the US Fed from its course of raising interest rates quickly and widely. The futures market is already pricing in over four percent key interest rates in the US for 2023.
75 Or 100 Basis Points?
These will likely be raised at least once to 3.25 percent next week when the Fed meets again after the summer break. While another 75 basis points are the mandatory program, after the latest inflation data, the stock market is again speculating about the big 100. No wonder, then, that the recent optimism has turned completely p[essimism and that the rally in the stock market was already over before it had begun.
In the United Kingdom, everything revolved around the funeral services for the late Queen, which is why the Bank of England postponed its meeting by a week. But the picture is the same as in the US: prices in August "only" rose at 9.9 percent due to lower energy costs, but both food and services have not yet reached the top of the price spiral.
Thus, a further increase in the key interest rate from 0.5 percent to 2.25 percent is almost a done deal for the BoE.
Shift To The Right In Italy?
On Europe's stock markets, the early elections in Italy on Sept. 25 could also cause buying restraint. The directional election is almost similar to the referendum in Great Britain on membership in the European Union when people ultimately opted for Brexit.
If there is a historic slide to the right in Italy, spreads for Italian bonds over bunds are likely to rise further. The election issue is still overshadowed by rising inflation and uncertainty about how significant the gas shortage will be in Italy in the winter. However, the ECB, with its recently established "Transmission Protection Instrument (TPI)," could quickly be called upon to counter market distortions after such an election.
Against this backdrop, it should be difficult for the DAX to regain the 13,000 mark. Holding the lower level of the current sideways channel at 12,800 points would already be considered a success in the coming week. From a technical point of view, nothing is burning between 12,800 and 13,150 points.
However, it is not uncommon for the market to turn back in the other direction after a triple witches' day, which would tend to open up opportunities on the upside here due to the overriding downward trend that continues to exist.
DAX - Current Supports And Resistances
- Supports: 12,900/12,850 + 12,700/12,650 + 12,400/12,350
- Resistances: 13,150/13,200 + 13,350/13,400 + 13,500/13,550