Most European indices closed the markets higher on Tuesday ahead of the Fed’s decision. Germany’s DAX index edged slightly higher and was boosted by gains in the industrial, telecoms and insurance sectors. Other European indices like UK’s FTSE 100 index, Euro STOXX 50 and French CAC 40 also closed higher.
Germany’s Economic Outlook
The DAX index was boosted by the strong German CPI figures released on Tuesday. According to the Federal Statistical Office, Germany’s Consumer Price Index (CPI) in May came in at 2.5% YoY. This was the highest inflation rate since September 2011.
The inflation rate was boosted by higher energy prices and the end of the temporary reduction of the VAT rates. Goods prices advanced at a higher rate and increased by 3.1%. The prices were boosted by a 10% surge in energy costs. Food prices declined by 1.5% as services gained 2.2%. Rent prices also rose by 1.4%.
Germany’s CPI main contributors include sectors such as housing, water, electricity and gas and other fuels. The DAX index recorded losses in technology, retail, and media.
Germany’s wholesale prices jumped 9.7% YoY in May. This was the largest gain since July 2008. The prices were boosted by gains in different sectors. Scrap and residual materials jumped 64.6% while the cost of petroleum products gained 45.8%.
Metals and ores went up by 41.2% while grains and animal feeds increased by 22.9%. Chemical products also rose by 11.4%. On the flipside, computer and software prices dropped by 4.7%. Communication equipment fell by 3.5%. The wholesale prices advanced to a 1.7% MoM gain in May.
The European Central Bank (ECB) sent dovish signals on the tapering of its monetary policy. This projected a stronger economic recovery. Steady vaccination rollout will also boost the economic recovery.
Investors now eye the Fed’s interest rate decision to be released on Wednesday. Investors are hoping to get clues on what the FOMC is thinking about future interest rates and the current inflation in the United States.
Some of the best performers in the DAX index include Siemens AG, MTU Aero, Deutsche Boerse and Siemens Energy AG. Siemens AG gained 1.95% in its stocks prices after large gains in the industrial sector. MTU Aero gained 1.78% while Deutsche Boerse gained 1.20%. Siemens Energy AG gained 0.87%.
Companies that dragged the index include Volkswagen VZO, Delivery Hero, Infineon, among others. Volkswagen fell by 1.87% while Delivery Hero dropped by 1.48%. Infineon declined by 0.75%.