DAX searches for direction as political upheaval meets tech sell-off

A blue wave has swept across the United States, handing the Democrats a landslide victory in the midterm elections and adding further turmoil to already nervous equity markets. The election result points to a fundamental shift in the balance of political power in Washington. It could become considerably more difficult for the US administration to push its economic policy agenda through Congress. Future tax, trade and fiscal policies, in particular, are now likely to move further into the spotlight for investors. The political uncertainty could hardly have come at a worse time for equity markets.

Asian markets slide as tech selling spreads

The reaction across Asian stock markets has been correspondingly severe. Japan's Nikkei temporarily plunged by 4.2%, while equity markets in South Korea and Taiwan also came under significant pressure. However, it would be too simplistic to attribute the losses solely to the election result. Investors have been increasingly pulling out of US technology and semiconductor stocks for several days. Concerns about elevated valuations and multibillion-dollar artificial intelligence (AI) investments have triggered a wave of selling that is increasingly spreading to other market segments. The long-celebrated technology rally is now at risk of turning into a broader market correction.

AMD offers a selective earnings rebound

Advanced Micro Devices' (AMD) quarterly results demonstrate just how selective investors have become in their assessment of individual companies. The semiconductor group delivered convincing results and was rewarded with a sharp rise in its share price. However, the stock had already suffered substantial losses beforehand. The positive reaction therefore also reflects a technical rebound. So far, isolated winners have been unable to bring about a sustained improvement in sentiment across the battered technology sector.

German earnings and the DAX trading range

For the DAX, the challenging international backdrop is compounded by a busy domestic earnings calendar. BMW, Continental, Fresenius, Vonovia, Scout24 and Heidelberg Materials are all due to report their quarterly results. At the European level, Novo Nordisk will also be in focus. In the automotive sector, investors will pay particular attention to sales performance, cost pressures and updated full-year guidance. For property companies, financing costs and valuation prospects are likely to be the decisive factors. The DAX is expected to trade within a range of 25,650 to 25,950 points today.