Uncertainty lingers despite initial gains made by Dax
The Dax, Germany's leading stock market index, has seen a change in sentiment among investors following the recent trade agreement with the USA, according to Jochen Stanzl, chief market analyst at CMC Markets.
Stanzl's comments, reported by CMC Markets, highlight a shift in the Dax's trajectory, with the index showing a bullish technical bias. However, investor caution remains high due to uncertainties from geopolitical tensions, such as the upcoming US-Russia talks, and mixed German economic data.
The Dax started trading on Tuesday with a gain of 0.6 percent, reaching around 24,115 points. Despite mainly selling throughout the day yesterday, the index managed to defend the important support at 23,900 points, a level that investors are currently clinging to, according to Stanzl.
There is still buying interest at the 23,900 points level, or at least selling reluctance, as per Stanzl. This change in sentiment is a departure from recent weeks, where the Dax has risen despite negative news.
The agreement with the USA, as identified by Stanzl, is the clear reason for the shift in sentiment. However, some experts have expressed disappointment with its impact on German economic sentiment, which has declined recently. This decline is reflected in the ZEW Indicator, which dropped from 52.7 to 34.7.
The numbers associated with the deal are now binding, as per Stanzl, creating hard facts and eliminating the possibility of sugarcoating. However, calculations of the impacts of tariffs, now more than four times higher, are likely to be gloomy.
In addition to geopolitical uncertainties, mixed corporate earnings reports have caused hesitation. While some stocks like Douglas performed well, others like RWE and HelloFresh plunged significantly, dampening broader market enthusiasm.
Despite these challenges, softer German inflation and expectations of a more dovish ECB policy are supporting demand for Dax-listed stocks, creating a bullish backdrop. If the Dax consistently falls below the 23,900 points mark, the risk of a real selling wave increases, as per Stanzl.
In summary, the current sentiment is cautiously optimistic with technical indicators pointing to potential upward movement, but tempered by economic concerns and geopolitical uncertainties. Future Dax movements may hinge on US inflation data, ECB policy steps, and geopolitical developments such as US-Russia diplomacy.
[1] Source: Reuters [2] Source: Handelsblatt [3] Source: Bloomberg
The recent shift in sentiment towards the Dax, Germany's leading stock market index, could be attributed to the trade agreement with the USA, as pointed out by Jochen Stanzl, chief market analyst at CMC Markets. This change in sentiment has come at a time when the finance industry is closely monitoring the industry and business landscape, given the uncertainties from geopolitical tensions and mixed economic data.
