Although the Fed’s interest rate turned dove to eagle in November, the slowing of the pace of interest rate hikes made the market jubilant, and US stocks continued to drive European stocks to rebound. In the short term, the decline in the dollar supports the German DAX40 index to hit the 14,000 mark.
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The marginal effect of the Fed’s monetary policy has weakened
Usually the Fed’s interest rate decision in November is a transition meeting, and major changes are still mostly announced in March, June, September, and December. The biggest highlight of this meeting is that the Fed intends to slow down the pace of interest rate hikes, the fastest in December implementation, which is seen as a plus. Of course, the Fed has a tough stance on the future direction of monetary policy, that is, the interest rate hike may take longer and the interest rate level may be higher.
Judging from the market trend after the meeting, investors are more willing to interpret it as positive, that is, the Fed’s sharp interest rate hike is nearing the end, and the monetary policy path tends to end. The fall of the dollar brought vitality to all non-US varieties, the euro and the pound rebounded sharply, and the US stocks continued to be strong.
From the perspective of the entire U.S. monetary policy cycle, the Fed’s interest rate hikes will continue, and the peak rate of interest rates will appear next year. The political and economic situation in Europe is full of uncertainties, and the global high inflation has a great impact on the macro economy. The United States cannot be immune. In order to suppress inflation, the Fed has raised interest rates by 75 basis points in a row, which is not sustainable in the face of economic slowdown pressure. The signal of “slowing down interest rate hikes” was released at this meeting, which has proved that monetary policy is not far from the “inflection point”. Can the stock market, which has been suppressed by the strong dollar for more than 10 months, not be excited?
Meanwhile, the European Central Bank is catching up with the Fed in raising interest rates. Affected by the energy crisis, the severe inflation situation in Europe forced the central bank to tighten monetary policy, at the expense of the economy, the rate hike may be tougher than the market expected. As the pace of interest rate hikes in Europe accelerates, while the Fed slows down interest rate hikes, the U.S.-European interest rate gap begins to shrink, and investors are frantically restocking European currencies. Even if the prospect of the situation in Russia and Ukraine is bleak, it may still be conducive to the re-pricing of European assets. European stock markets benefit.
German DAX40 index: regaining 13,500 is conducive to establishing a bottom
The German DAX40 index followed the trend of U.S. stocks. The previous index hit 11,500 and then rebounded. The first-line support of 12,500 was consolidated and successfully broke through 13,500. 12,400-13,500 is at the downward trend line of the historical high of 16,285. Recovering this line will help strengthen the rebound. , If it can break through 14000, it will attack the key price of 14800-15000 above. Until the station above 15000 restarted a strong rise.
In the short term, the competition for 13,500 is still in progress, and the index may continue to rise if the callback does not fall below 13,000. Once it falls below 13,000, it will test 12,500 again. Tends to do more on dips as the main idea.
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