German investors remain calm as turbulence on global stock exchanges continues

BERLIN, Feb. 9 (Xinhua) -- Germany's markets have weathered the continued turbulence on U.S. and Asian financial markets relatively well on Friday.

The Frankfurt-based stock exchange was largely stable after the opening of trading in the morning before declining slightly to 12,056.86 points in the afternoon (CET).

By contrast, Wall Street had witnessed another collapse in stock values on Thursday evening, with the Dow Jones index slumping by 1,000 points (minus four percent). Stock exchanges in Asia subsequently followed this steep downward trajectory on Friday.

Observers have largely attributed the recent sell-offs to fears that interest rates could rise again soon in the U.S., making equity investments less attractive relative to bonds. If the U.S. economy continues to boom following President Trump's major overhaul of corporate taxation and inflation rises as a result, the Federal Reserve may be forced to act swiftly and decisively to stabilize the monetary supply.

Global equity markets have been soaring for several years, benefiting from ultra-loose monetary policy in major economic blocs such as the U.S. and Eurozone in the wake of the 2007/08 financial crisis.

Commenting on the reversal of fortunes on Friday, Deutsche Bank experts opined that a correction in prices was hence overdue.

"Aside from occasional volatility, the development of stock markets only seemed to know one direction", a statement by the financial institute read.

While yields on ten-year U.S. government bonds have recently risen again to 2.8 percent, the return on equivalent German public debt titles is a meek 0.76 percent. Unlike the U.S. which has been running "twin" budget and current account deficits for years, Germany has continuously run budget surpluses since 2014 and achieved the world largest current account surplus in 2017.

Another explanation for the series of Wall Street crashes is the growing importance of automated trading by computers, raising the likelihood of so-called "flash crashes". Enditem