DAX Sets New All-Time High – Metro Tokyo to Launch IPO

The German stock index set 2 back-to back-new ATHs following the lead from US stocks. The launch of publicly owned Metro Tokyo IPO is the largest in Japan for 6 years.

The DAX reached 19,554 yesterday and 19,642 today, printing 2 new all-time highs in a row as market sentiment shifts to fast action from central banks. Investors are perceiving that the ECB will cut rates on October 17 at this week’s meeting.

The sentiment following various statements by ECB officials and other national central bankers is that it won’t be the last. The European economy is struggling, and Germany, the Eurozone’s largest economy, is expected to experience a mild recession.

The ECB will have no choice but to cut rates in quick succession. Another factor that plays into the monetary loosening is the speed at which the Fed will act on interest rates. US Stocks have also benefitted from the perception of lower rates and sooner.

The DOW has posted 3 successive ATHs, gaining 1.62% in the past 2 sessions. The schedule on interest rate cuts from the Fed will offer the ECB an easier route to rate cuts. The euro FX rate could suffer and create imported inflation without concurrent action from the US central bank.

Metro Tokyo IPO

The Japanese government and the City of Tokyo have announced the IPO of Metro Tokyo for October 23. The national and local governments own 53.4% and 46.6% of the subway operator, and is expected to fix the IPO price at 1,200 yen per share.

The IPO is expected to collect ¥348.6 billion ($2.3 billion) at the offering price. The share price is expected to give a dividend yield of 3.3% per fiscal year, which ends in March 2025. The NIKKEI225 is down 0.99% on the day as the index struggles to follow its US peers to new highs.

Investors are faced with the specter of higher interest rates as the BoJ sets course for policy normalization. Recent comments from the Prime Minister, Shigeru Ishiba have highlighted the need for prudence.

The market has had some reprieve from those comments; however, sentiment is still focused on how well the economy can perform as the BoJ tightens monetary policy.