DAX holds firm despite tech sell-off as Japan and South Korea are hit hard

Profit-taking hits Asian technology stocks

The pattern remains unchanged: strong market sessions, such as Monday's rally, are increasingly being used by investors to lock in profits, particularly in AI and semiconductor stocks.

Asian equity markets felt the full force of this renewed selling pressure overnight, with technology shares dragging the major indices in both Japan and South Korea sharply lower.

Japan and South Korea fall sharply

Japan's Nikkei 225 fell by more than 3% at one stage, while South Korea's Kospi plunged by over 10%, weighed down by heavy losses in index heavyweights Samsung Electronics and SK Hynix.

Against this backdrop, the DAX is proving relatively resilient and is expected to open only modestly lower, once again benefiting from its comparatively limited exposure to large-cap technology stocks.

AI valuations remain under scrutiny

Declining energy prices are offering only limited support to equity markets. Investors remain increasingly sceptical that highly valued AI-related technology companies will be able to deliver the ambitious earnings and revenue growth currently reflected in their valuations.

LVMH and Mercedes-Benz support the earnings focus

Meanwhile, the European earnings season is gathering momentum. LVMH, one of Europe's most influential companies, reported quarterly results after Monday's close that exceeded analysts' expectations, leaving the luxury goods group's shares modestly higher in early trading.

Mercedes-Benz has also attracted attention following its earnings release. Investor concerns proved largely unfounded, with the automaker continuing to perform relatively well despite a challenging market environment. Nevertheless, China remains the key headwind for Germany's automotive sector, prompting Mercedes-Benz to adopt a more cautious stance on its sales outlook.

Fed meeting and US data move into focus

Today's session will reveal whether Frankfurt can preserve the constructive sentiment seen at the beginning of the week. Attention is increasingly turning towards the upcoming Federal Reserve meeting and a series of key macroeconomic releases from both the United States and Europe.

Today's focus will be on the ADP employment report and US consumer confidence, both of which could shape expectations ahead of the Fed's policy decision. From a technical perspective, the DAX is expected to trade within a range of 25,200 to 25,500 points during today's session.