For investors on both sides of the Atlantic, a nerve-wracking trading week is likely to come to an end. In addition to the Fed meeting, weaker-than-expected US economic data and overly high expectations for the reporting season in the US were the main causes of disappointment. On Friday afternoon, the focus will be on the NFPs.
DAX Chart
Source: Tradingview
German GDP weaker than expected - EU economic output may increase
On Tuesday, new data on German gross domestic product (GDP) stood out in particular, which disappointed across the board. Contrary to expectations, initial estimates indicate that economic output in Germany declined in the second quarter compared to the same quarter of the previous year. Economists had previously expected an increase of 0.1 percent.
The equivalent figure for the eurozone, on the other hand, rose by 0.3%, which was slightly better than expected (0.2%).
Inflation in Germany proves to be stubborn - EU inflation also on the rise
The fact that German inflation remains stubbornly high is likely to have somewhat dampened market participants' hopes of interest rate cuts. According to preliminary figures, inflation stood at 2.3% in July and was therefore higher than previously estimated (2.2%).
In the middle of the week, new inflation data for the eurozone also signaled an increase in inflation. At 2.9%, the so-called core rate was as high as in the previous month and therefore 0.1 percentage points higher than expected.
US Fed leaves key interest rate unchanged - Powell opens door for rate cut in September
As expected, the US Federal Reserve (Fed) did not turn the interest rate screws late on Wednesday evening, leaving the key interest rate unchanged at a range of 5.25-5.50 percent.
However, Fed Chairman Jerome Powell opened the door to a possible interest rate cut next September without sending any clear signals.
US economic data disappoint - non-farm payrolls round off the trading week
The ISM index for the manufacturing industry in the US disappointed on Thursday, proving to be a mood killer. At 46.8 points, the purchasing managers' index for July was significantly weaker than in the previous month (48.5 points).
This Friday, the focus will be on the official US labor market report (Non-Farm Payrolls). Economists expect non-farm payrolls to increase by 175,000 units, compared to 206,000 units in the previous month. Consequently, the unemployment rate is likely to remain at 4.1%. Weak signals from the labor market should tend to be welcomed by investors, as this could lead to interest rate cut fantasies gaining momentum.
Expectations of US tech giants obviously too high - disappointment also in Frankfurt am Main
The reporting season was also a tough one this week. Microsoft, for example, was able to increase its turnover, but its cloud business is growing more slowly than expected despite billions in AI investments.
The world's largest online retailer Amazon disappointed investors with its sales forecast on Thursday evening. The iPhone manufacturer Apple generated slightly less than expected with its smartphones in the past quarter. In return, however, sales of iPad tablets more than closed the gap.
The bottom line is that disappointment initially prevails. The bar for the quarterly figures of the glorious seven obviously remains too high.
