The stock markets started Wednesday trading with losses. The Dax slumped by around 1.5 percent to 15,910 points. Since Friday's record high of 16,330 points, the headwind has prevailed. Traders pointed to the debt dispute in America, which weighed on sentiment. Here, however, the prevailing opinion is that, as always, a last-minute agreement will be reached. Until this is there, however, some buyers keep their feet still and do not want to take any risks. For example, reports that the U.S. Treasury Department had already asked federal authorities to postpone the upcoming payments were worrying.
If the parties in the United States do not agree on a higher debt ceiling, the US government is threatened with insolvency from the beginning of June and thus as early as next week. This could lead to a prioritization of spending, i.e. that, for example, pension payments have to be cancelled, at least temporarily, in order to service the foreign debt.
In Germany, the fall in the Ifo business climate index confirmed the prevailing economic pessimism. The index fell from a revised 93.4 to 91.7 points in May, more than expected. Above all, the view into the future of the 9000 company executives surveyed is characterized by skepticism. It was the first decline in the barometer, which is highly regarded by the financial markets, after six consecutive increases. According to the Ifo Institute, the hoped-for spring revival threatens to fail. "Another sign of weakness. This still looks like a recession," warned Jens-Oliver Niklasch, economist at LBBW.
According to Ifo, the negative development was driven by significantly more pessimistic expectations. However, companies were also somewhat less satisfied with their current business: "The German economy is sceptical about the summer," said Ifo President Clemens Fuest. The mood in the economy has been significantly dampened.
"The German economy is treading water," said Klaus Wohlrabe, head of Ifo surveys. "In the second quarter, it is likely to go in the direction of stagnation." The gross domestic product of Europe's largest economy had already stagnated in the first quarter, after it had even shrunk by 2022.0 percent at the end of 5. According to the expert, one reason for the expected slump is the interest rate hikes with which central banks around the world are reacting to higher inflation.
Interest rate hikes have a dampening effect
"The interest rate hikes seem to be dampening demand," Wohlrabe said, referring to the rise in interest costs. For example, export expectations in German industry have fallen. "It has probably received significantly fewer new orders," said the Ifo expert. "Demand is becoming a problem." The German Chamber of Industry and Commerce (DIHK) expects an economic slowdown and high inflation this year. There were still no signs of a broad upswing. According to the EU Commission's forecast, Germany is expected to be one of the worst performers in the euro area in terms of economic dynamism this year, with gross domestic product (GDP) expected to grow by 0.2 percent.
But there are also rays of hope. As a result, material bottlenecks have decreased once again – as has the proportion of companies that want to increase their prices. "However, it is likely to take some time before the easing of tensions reaches end consumers," Wohlrabe said, referring to the inflation trend. At present, consumers are still reluctant to consume.