DE40: Holidays in the US and UK curb volatility in Europe

• Lack of US and UK sessions limits volatility in Europe
• Moody's lifts TAG Immobilien's credit rating
• ECB bankers hint at interest rate cuts next Thursday 

General market situation:

The first trading session on European trading floors in the new trading week brings limited investor activity, due to the banking holiday in the US and the UK. The lack of trading on these key markets results in a mere 0.08% rise in spot market quotes on the German trading floor. On the corporate side, we also did not learn an inordinate amount of key information. The exception in this aspect may be the upgrade of the long-term rating for TAG Immobilien AG (TEG.DE) by Moody's. The IFO report came out almost in line with analysts' expectations, so the reaction to the data was almost imperceptible. 

European companies traded at mixed levels during Monday's trading session. Strong gains in U.S. AI, semiconductor and graphics card stocks listed in Europe may indicate that the Big Tech sector on Wall Street may start Tuesday's cash session higher (there will be no cash session today due to the U.S. holiday). Source: xStation 5

Volatility currently observed in the DAX index. Source: Bloomberg Financial LP

Germany's benchmark DE40 has seen minimal gains during today's session, not even reaching 0.05%. The quiet session on the German stock market is mainly due to the absence of sessions in the US and the UK. The benchmark nevertheless continues to remain in the structure of the downward trend initiated on May 16. In the medium term, the continuation of the downward trend may create a place to test the historically important support level in the zone of the 50-day exponential moving average (blue curve on the chart). Locally, the most important resistance all the time remains the historical peak at 19,000 points and the local barrier set by the former historical peak of April 2 this year (zone of 18840 points). Source: xStation 5

News:

The credit rating agency Moody's today upgraded the long-term credit rating of TAG Immobilien AG (TEG.DE) to “investment grade, Baa3, outlook stable” (previously it was “non-investment grade, Ba1, outlook stable”). 

According to Moody's, the rating upgrade reflects in particular TAG's continued strong operating performance and the company's disciplined financial policy in a difficult market environment due to rising interest rates. By upgrading the rating, Moody's has aligned itself with rating agency S&P Global, which had already raised the “negative outlook” of its existing “BBB-” investment grade rating to “stable” on March 28, 2024.

There's also a lot going on today in the realm of the European Central Bank's monetary policy. The money market is almost convinced (90% probability implied by the swap market) that the ECB will cut rates by 25 basis points next Thursday, thus starting a cycle of rate cuts in the Eurozone. 

In this aspect, the money market's conviction is confirmed by today's speeches by central bankers. The ECB's Rhen communicated that inflation is approaching the 2% target on a sustainable basis, and therefore in June it is time to ease the stance of monetary policy and start cutting interest rates. The ECB's Philip Lane's comments took a similar tone.   Source: Bloomberg Financial LP

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