Before the weekend, the principle of caution initially dominates the German stock market. It remains to be seen whether investors in the USA will be drawn into further commitments. After speculation about a quick de-escalation in the Iran conflict, disillusionment is increasingly spreading. Since the major diplomatic breakthrough regarding the Iran conflict has so far failed to materialize, market participants might now be withdrawing their prior confidence. The market is increasingly realizing that the Trump-Xi summit was mainly symbolic and merely masked geopolitical risks without resolving the underlying uncertainties.
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Investors probably hoped for clearer signals – Iran conflict continues to smolder
The results of the talks between U.S. President Donald Trump and Chinese President and Party leader Xi Jinping had been eagerly awaited on Thursday and Friday mornings, respectively. However, investors are still denied a real breakthrough in the Iran conflict. According to U.S. reports, the two agreed, however, that the Strait of Hormuz must remain open for energy transport. China, on the other hand, spoke out against the militarization of the strait and against fees for ships wanting to pass through it.
US Inflation Rises to 3.8 Percent in April – US Producer Prices Jump
Investors' focus in recent trading days was particularly on US inflation data. At 3.8 percent, inflation in April (compared to the same month last year) was higher than expected (3.7 percent), following 3.3 percent in the previous month.
The core inflation rate, which excludes energy and food price drivers, also came in higher than expected at 2.8 percent (2.7 percent), compared to 2.6 percent in April.
US producer prices, released on Wednesday, confirmed price pressures in the world's largest economy. Month-over-month, these prices rose by 1.4 percent, significantly stronger than economists' estimates of 0.5 percent. In the previous period, they had risen by 0.7 percent.
During holiday trading on Ascension Day, investors in this country were confronted with US retail sales, which increased by 0.5 percent (month-on-month) as expected (previously: 1.6 percent). Retail sales thus continued to grow despite the burdens caused by inflation.
Kevin Warsh confirmed by US Senate as new Fed Chairman
The recent confirmation of Kevin Warsh as the new Fed Chair by the US Senate should also provide material for discussion in the market. 54 governors voted for him and 45 against him. Powell's term ends in mid-May. What monetary policy Warsh will pursue in the future remains open. Investors are likely to be particularly hopeful about the preservation of the central bank's independence. US President Donald Trump has once again publicly criticized the Fed in recent months and insisted on lower interest rates.
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