The interest rate decisions of the European Central Bank (ECB) and the US Federal Reserve (Fed) have put the stock markets in a good mood.

The Dax remained up after the ECB decision on Thursday afternoon, gaining 0.6 percent to 16,854 points. It had previously broken through the 17,000 point mark for the first time in its 35-year history, climbing 1.4 percent to 17,003.28 points at its peak. The EuroStoxx50 advanced by 0.7 percent to 4562 points. Futures for the most important US indices were also up, pointing to rising prices at the start of trading.

At its last monetary policy meeting of the year, the ECB decided, as expected, to leave the key interest rate at 4.50 percent. The financial market is already betting on a first interest rate cut in spring 2024 in view of the recent significant slowdown in inflation. Experts urge caution. "Hopefully the ECB will leave its key interest rates at the current level for long enough. It must not buckle because of a few surprisingly low inflation data," said Commerzbank chief economist Jörg Krämer. "After all, inflation is falling primarily because the massive price increases for energy and food and the shortages of materials are abating. All of this is currently even putting the brakes on prices for services." However, due to the sharp rise in wages, inflation is likely to settle at three percent in 2024 rather than the two percent targeted by the ECB.

COMMODITY INVESTORS ARE BANKING ON RISING DEMAND

The euphoria on the stock markets had already been fueled by the Fed's interest rate outlook the previous evening. Investors' fantasies of interest rate cuts boosted Wall Street, with the Dow Jones closing at an all-time high on Wednesday. Fed Chairman Jerome Powell signaled that interest rates would soon be cut after the monetary authorities left the key monetary policy rate in the range of 5.25 to 5.50 percent for the third time in a row. On average, the central bankers expect the key interest rate to fall by 0.75 percentage points next year.

However, experts believe that the risk of a setback on the stock market will increase the longer the record chase continues. One indicator of this is the "Fear & Greed Index" from CNN Business, said Christian Henke from broker IG. This is intended to measure the emotions of investors on the stock market. The index is in the "Greed Sector", shortly before entering the "Extreme Greed" market state, explained Henke. "This means there are increasing warning signs of overheating on Wall Street." If the index continues to rise, investors should expect an imminent correction.

COMMODITY PRICES ON THE RISE - DOLLAR UNDER PRESSURE

On the commodities market, investors were particularly keen on oil and the industrial metal copper. North Sea oil Brent and US oil WTI rose by around 2.5 percent to 75.98 and 71.11 dollars per barrel respectively. The price of copper also rose by 2.6 percent to 8550 dollars per ton. In contrast, the US currency fell. The dollar index fell by 0.4 percent to 102.425 points, its lowest level since mid-August.

Among the individual stocks on the German stock market, real estate stocks, which had suffered particularly from the marathon of interest rate hikes by central banks due to higher refinancing costs, were in particular demand. The Vonovia share was one of the biggest winners with an increase of 8.3 percent. In the MDax, Aroundtown Properties and LEG Immobilien gained just under eleven and just under seven percent respectively. The European sector index climbed by 5.6 percent. Financial and insurance stocks lagged behind. The shares of Hannover Re and Munich Re were each down around three percent in the Dax.

(Edited by Christian Götz. If you have any questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).

- by Daniela Pegna and Zuzanna Szymanska