The German stock market saw a cautious response on Thursday ahead of the widely anticipated rate hike by the European Central Bank (EZB). The DAX index was down 0.2% at 25,529 points by midday. The previous day's sharp decline, driven by a surge in oil prices to over $100 per barrel, had pushed the DAX to its lowest level since late July.
The Brent crude oil price for November delivery reached $102.50, its highest level since May. The MDax index also declined by 0.4% to 31,967 points, while the Eurozone-leading EuroStoxx 50 index showed a modest decline.
Experts widely expect the EZB to implement its second rate hike of the year, increasing the key rate by 25 basis points to 2.50%. Higher interest rates typically pose a challenge to stock markets, as they increase the financing costs for companies, raise investment expenses, and make bonds a more attractive alternative investment.
"The outlook from the EZB will be crucial. Markets currently anticipate further rising interest rates and two additional rate hikes in the coming year," said Thomas Altmann from QC Partners. Commerzbank analysts noted that "inflation is expected to continue rising in the coming months and is gradually approaching the negative scenario outlined by the EZB."
Analyst comments were a key driver of stock movements. Shares of gear manufacturer Renk fell by 2% after investment firm Exane BNP downgraded them to "Neutral."
In contrast, shares of RWE, Porsche AG, MTU Aero Engines, and DHL benefited from positive comments from US investment bank JPMorgan. However, the gains were modest.
Stocks in the software sector were not in favor. Investors showed caution ahead of the quarterly earnings reports of IT and software giants Oracle and Adobe, which were released after the US market close. Shares of SAP fell 2.6%, Nemetschek 1.3%, and Teamviewer 1.4%.
