DAX follows technology rally as AI optimism and bond yields go head-to-head

The DAX is expected to initially follow the positive lead from the technology sector at today’s open. On Wall Street, the Nasdaq 100 reached a new record high, defying concerns over rising bond yields. Technology-heavy markets in Asia also followed the move higher.

Investors therefore continue to face a choice between two competing opportunities in financial markets. On the one hand, there are AI and semiconductor companies with trillion-dollar valuations; on the other, government bonds offering increasingly attractive yields. Yields of more than 5% on ten-year government bonds are becoming increasingly tempting for many investors and are emerging as a genuine investment alternative to equities.

German factory orders are providing a headwind at the start of trading in Frankfurt. Industrial orders plunged by 10.6%, significantly more than expected. The decline was driven primarily by a sharp fall in large-scale orders from sectors such as defence, shipbuilding and aircraft manufacturing. So far, however, investors appear to be merely taking note of the weak data.

With today’s economic calendar offering little in the way of fresh catalysts, the battle between technology stocks and bond yields is likely to dominate trading. For now, AI euphoria is winning this tug of war. However, the more attractive bond yields become, the higher the bar for further equity market gains.

From a technical perspective, the DAX is expected to trade within a range of 25,200 to 25,450 points today.