DAX remains on record course despite geopolitical and policy concerns

The German equity market continues to shrug off developments in the Middle East and concerns about higher US interest rates, with the DAX expected to start the new trading week only slightly lower.

In Asia, however, profit-taking continued today, particularly in technology stocks. This trend was already evident last week and was interrupted only briefly by the euphoria following Nvidia’s earnings. Chinese economic data also weighed on sentiment. The purchasing managers’ index improved slightly but, at 49.8 points, remained below the 50-point threshold and therefore in contraction territory. Investors had been hoping for greater momentum in China’s economic recovery.

Fed Chair Kevin Warsh’s speech at Jackson Hole delivered at least one surprise for investors, forcing them to reconsider expectations that the Federal Reserve would remain patient on further rate hikes. The remarks strengthened the US dollar and sent the probability of monetary tightening as early as September sharply higher to almost 60%, from around 35% previously.

In Frankfurt, however, investors appear determined to push the DAX to fresh records this week despite the more complicated backdrop. The renewed escalation in the Middle East and the resulting rise in oil prices are hardly supportive, but the market’s underlying momentum remains resilient.

From a technical perspective, the DAX is expected to trade within a range of 26,400 to 26,600 points on Monday.