Europe’s stock exchanges are creeping up to highs with Powell’s help

Dhe Fed’s renewed commitment to an ultra-loose monetary policy encouraged more investors to buy European stocks on Monday. However, hopes of a further economic recovery supported by monetary policy were offset by the suspected damage from Hurricane Ida in the United States and worries about the spread of the particularly contagious delta variant of the corona virus, so that profits were limited.

In this environment, the Dax climbed 0.2 percent to 15,888 points in the early afternoon, the record high within reach. Around two and a half weeks ago, the German selection barometer briefly climbed above the 16,000 point mark for the first time, but has not yet reached this level again. The Euro-Stoxx-50 for the euro area also gained 0.2 percent to 4200 points. The important London Stock Exchange was closed due to public holidays.

The record mood of Wall Street does not jump over to the domestic stock exchanges, said portfolio manager Thomas Altmann from the investment advisor QC Partners. The problem is still the lack of willing investors. Fortunately, the willingness to sell is similarly low.

The US Federal Reserve Chairman Jerome Powell announced on Friday that securities purchases would be cut back, but did not give a specific date. “Even if the Federal Reserve were to start reducing bond purchases in the fourth quarter or at the turn of the year, it would still be a long way from taking money out of the market and the financial world is still miles away from an interest rate hike,” said analyst Jochen Stanzl from the online Broker CMC Markets: “There was no indication of a hasty change in course by the Fed in Powell’s speech on Friday.” The dollar index, which reflects the exchange rate in relation to major currencies, temporarily fell to a two-week low of 92.595 points .

Reinsurers under pressure

In the face of hurricane “Ida” and losses that are still difficult to assess, the shares of reinsurers were under pressure. Munich Re lost more than 1 percent in course, Swiss Re fell by around 1 percent. Analyst Georg Marti from Zürcher Kantonalbank estimated the possible burdens for Swiss Re alone at several hundred million dollars. However, Swiss Re has extensive own funds in order to be able to cope with such damage.

In Madrid, the Rovi titles headed for the largest daily loss in the company’s history, with a loss of around 22 percent at times. Japan has withdrawn several million doses of Moderna’s coronavirus vaccine, produced by contract manufacturer Rovi, due to contamination. The minus was later reduced to 14 percent.

At Roche, meanwhile, the course reaction to the news that the pharmaceutical company had voluntarily withdrawn an application for an accelerated approval process in the United States was limited: after initially clearer discounts, a narrow minus was posted in line with the industry. The relevant registration application related to the drug Tecentriq in combination with chemotherapy for the treatment of a certain form of breast cancer, as Roche announced on Friday.

Markets seem calmed down

On Friday afternoon, European time, as part of an international central bank conference in Jackson Hole, Powell announced that purchases of US government bonds would be reduced this year, as the American labor market had made “significant progress”. Next Friday, the US government’s monthly report will shed light on the latest employment trends in the domestic private sector. With a view to the central bank’s inflation target, Powell spoke of “substantial further progress” at the online event.

However, the head of the central bank also referred to the delta variant of the corona virus, which is still rampant, and emphasized that the start of the reduction in the bond purchase program is not a direct sign of an imminent rate hike. In the financial markets, the cautious statements on interest rates, which allayed worries about an abrupt change in monetary policy, were primarily taken into account.

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