DAX stabilises as SAP beats expectations while automakers disappoint

Rate fears return as oil prices rise

Fears of higher interest rates have returned to the market as oil prices continue to climb and the European Central Bank warned that it expects additional inflationary pressure from elevated energy costs.

At the same time, stronger-than-expected US labour market data weighed on sentiment by giving the Federal Reserve greater room to tighten monetary policy without significantly undermining economic growth. Adding to the cautious mood, a series of mixed corporate earnings reports prompted investors to take profits across the major equity indices.

SAP helps Frankfurt stabilise

Asian markets picked up the negative lead overnight, with equities in Japan, South Korea and China moving lower. Frankfurt, however, looks set for a more stable start following yesterday's decline in the DAX.

Investors were encouraged by SAP's quarterly results, which came in ahead of expectations. The German software giant once again demonstrated strong momentum in its high-margin cloud business.

Automakers disappoint as restructuring costs weigh

By contrast, earnings from Porsche and Volkswagen disappointed as expected, puncturing the recent optimism surrounding the European automotive sector. Both companies continue to grapple with substantial restructuring costs, delaying the recovery investors had hoped for.

Nevertheless, the sector's relatively modest weighting in the DAX limits its overall impact, with losses in Volkswagen, Mercedes-Benz and other carmakers largely offset by gains in heavyweight constituents such as SAP and Rheinmetall.

Intel offers support for European chip stocks

Meanwhile, Intel's quarterly results provided a positive read-through for Europe's semiconductor sector. The US chipmaker delivered a stronger-than-expected increase in revenue, raising hopes for companies such as Infineon, SUSS MicroTec and ASML.

PMIs and tariffs move back into focus

Attention now turns to purchasing managers' indices from both Europe and the United States, which should provide fresh insights into the economic outlook on both sides of the Atlantic.

In addition, the issue of tariffs is returning to the forefront. US President Donald Trump has taken another step towards implementing tariffs on imports from 60 countries, including members of the European Union, raising concerns that further trade measures could follow.

DAX still battles around 25,000

The battle around the 25,000-point mark is therefore likely to remain the defining feature of DAX trading in the coming days, although sustaining gains above this psychological threshold is becoming increasingly challenging.

From a technical perspective, the index is expected to trade within a range of 24,650 to 25,000 points.