Our stock market experts take a look at the coming week. Investors are struggling with further interest rate hikes by the ECB and the Fed – also because some companies are showing themselves excessively when it comes to price increases.
Share this article
Germany has a new battle term: greed inflation. What is meant is that the rate of inflation can be traced back to a clear degree to the profit orientation of companies – they not only swim with the flow of inflation, but also raise prices more than would be necessary to compensate for higher costs. Studies support the thesis of profit-taking linked to insufficient competition.
Even the European Central Bank (ECB) is concerned: “The impact of profits on domestic price pressure is exceptionally high.” Food manufacturers, for example, are seen as driving the development.
“Used inflation to grab customers’ pockets”
LBBW chief economist Moritz Kraemer says: “Companies, but also retailers, have used the inflation to dig deeper into their customers’ pockets.” If everything else becomes more expensive, consumers find it more difficult to assess which price increases are disproportionate. Because broken supply chains had reduced competition between providers in the previous year, pricing power had grown. “This explains why the Dax companies as a whole have increased their sales and profits despite the war and inflation.”
As a result, inflation has stubbornly persisted, even though global energy prices have returned to pre-crisis levels. For this reason, and because of the rising wage pressure from high wage agreements, the ECB raised its key interest rate by a further 25 basis points last week – as did the US Federal Reserve before it. They were the expected small steps. While the Americans will probably take a break from raising interest rates for the time being, the ECB is keeping the option open to do it again.
Summer doldrums could start earlier
The decisions will probably take effect in the new week. Economic risks, troubled banks and the dispute over the national debt ceiling are also causing unrest in the USA. European markets can hardly escape this. After a stock market rally lasting a good seven months, “the probability that the summer lull will start earlier than usual this year should be higher,” the LBBW analysts suspect.