At the end of a dreary stock exchange week, the German stock market extended its recent losses. Concerns about the global economy are currently determining what is happening after a previously strong run on the stock exchanges.

The leading German index, the Dax, closed 0.65 percent lower at 15,574.26 points on Friday. In the meantime it had almost fallen to its lowest level since the beginning of July at 15,456 points. On a weekly basis, the Dax lost 1.6 percent. The MDax of medium-sized companies fell by 1.33 percent to 27,153.23 points on Friday.

Two problems lead to losses

“The air from the stock market seems to be gone and the rally break since the beginning of the month has not yet ended,” wrote analyst Konstantin Oldenburger from the trading house CMC Markets. Investors are faced with two problems: First, the economy in China is always sending gloomy signals, and second, real interest rates are rising again, making bonds more attractive than stocks.

In addition, contrary to investor hopes, interest rates could remain high for a longer period of time. “There is a notable repricing of longer-term interest rates,” said Blackrock Investment Institute strategist Jean Boivin. The market is increasingly coming to believe that despite recent progress, there will be long-term inflationary pressures. Macroeconomic uncertainty will persist for years to come, requiring greater compensation for holding long-dated bonds in the form of high interest rates.