Stock Market Update: DAX at its peak since mid-July - Could rate cuts be on the horizon?
In a significant development for the global financial markets, the US Federal Reserve Chair, Jerome Powell, signaled a potential rate turnaround in September, sending stocks soaring around the world.
The tech-heavy Nasdaq 100, which includes tech giants like Apple, Microsoft, and Google's parent company Alphabet, gained 1.61% to 19,806.55 points. This increase follows the Dow Jones Industrial Average's 1.02% rise at the start of trading, reaching a three-week high of 41,128.21 points. The broad-based S&P 500 also rose 1.25% to 5,640.31 points, suggesting a weekly gain of over one percent for the US leading index.
The surge in the Dow Jones Industrial Average and the S&P 500 was mirrored in other major markets. The Euro Stoxx 50, a blue-chip index comprising 50 European stocks, rose to 4,896 points. Similarly, the DAX, Germany's leading stock index, reached its highest level since mid-July at 18,600 points, following a surge triggered by Powell's speech at the Federal Reserve's annual symposium in Jackson Hole, Wyoming.
The rally in global markets comes in response to Powell's statements indicating a possible cut in the benchmark interest rate in September. The rate cuts are in response to decreased inflation risks, as stated by Powell. A majority of economists surveyed by Reuters expect a quarter percentage point cut on September 18. Several economists, including those from major financial institutions like Goldman Sachs and JPMorgan, expect the US Federal Reserve to lower interest rates sometime in September or later in 2025.
Further rate cuts of the same magnitude are potentially expected in November and December. The benchmark interest rate, which has been in a range of 5.25 to 5.50 percent for over a year, could see a significant drop in the coming months.
This potential rate turnaround by the US Federal Reserve is expected to have a positive impact on global markets, as lower interest rates often lead to increased investment and economic growth. However, it is important to note that the markets can be influenced by a multitude of factors, and the outlook can change rapidly.
As the situation develops, investors and market participants will closely watch the actions of the US Federal Reserve and other central banks around the world to gauge the impact on global financial markets.
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