German stocks rallied on Friday, buoyed by a decline in yields on European government bonds as investors speculated on potential interest rate cuts from both the Federal Reserve and the European Central Bank. On Thursday, Federal Reserve Governor Christopher Waller indicated on CNBC that the U.S. central bank might implement several interest rate reductions this year, contingent on inflation following the anticipated downward trend.
Governor Waller forecasted that there could be three or four reductions of a quarter of a percentage point each if the economic data supports such a move. However, if the data does not align with expectations, the number of cuts could be reduced to two or even just one.
Meanwhile, the yield on the 10-year Bund declined for the third consecutive day, last settling at 2.494%. Yannis Stournaras, a member of the ECB's Governing Council, echoed a similar sentiment on Thursday, suggesting that the ECB should maintain its course with a series of rate cuts in upcoming meetings. Market participants are currently anticipating a 100-basis point reduction from the ECB within the year.
As a result, Germany's benchmark DAX index gained 105 points, equating to a 0.5% increase, reaching 20,760 following a 0.4% rise the day before.
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