Rising oil prices and high bond yields weigh on the DAX

The battle for the 26,000-point mark is becoming increasingly difficult for the DAX. Investors remain firmly focused on oil prices, with the $100 a barrel threshold emerging as a critical level for investment decisions. Prices below that mark tend to trigger selective buying in equities, while a move above $100 a barrel almost completely erodes investors’ appetite for risk assets.

Rising energy prices and their knock-on effects are weighing on consumer sentiment, while at the same time putting further interest rate hikes by central banks firmly back on the agenda. Neither development is supportive for equities, particularly as high bond yields now offer investors a genuine alternative to stocks. Many asset managers are already considering reallocating capital towards fixed income, contributing to outflows from equity markets.

The current geopolitical environment, characterised by rising energy costs and supply chain disruptions, is preventing the economic recovery in Europe, and Germany in particular, from gaining further momentum. The German economy remains highly dependent on imported commodities, while companies are facing declining margins that, over the medium term, will be difficult to offset through further job cuts or other cost-saving measures.

Sentiment on Wall Street remains considerably more positive than across European financial markets. The US labour market is more resilient, while consumer spending is showing only limited signs of cooling. At the same time, strong performance among semiconductor and AI stocks continues to support investor sentiment, helping to offset the negative impact of rising bond yields.