The DAX faces the challenge of defending the 26,000-point mark it reclaimed yesterday. However, the trading week looks set for a turbulent finish. Across international equity markets, investors are increasingly pulling out of semiconductor and artificial intelligence (AI) stocks. Following quarterly results from Alphabet and Meta, Amazon and Intel have now added to doubts surrounding the lofty expectations for the technology sector. Risk appetite is visibly declining, and the reduction in equity exposure already evident during Asian trading is unlikely to leave European markets unscathed.
Inflation keeps central banks on alert
At the same time, inflation remains a persistent threat. At today's press conference, the Bank of Japan (BoJ) once again highlighted ongoing price pressures. Japanese inflation remains above the central bank's 2% target, with elevated energy prices resulting from the war with Iran adding further pressure. A similar dilemma was evident at yesterday's European Central Bank (ECB) meeting. Central banks have limited ability to tackle energy-driven price increases directly, but they must prevent them from translating into persistently higher inflation. Monetary policy therefore remains a headwind for the medium-term outlook for equity markets.
German recovery hopes face rising costs
Against this backdrop, the DAX's relative strength is particularly noteworthy. While technology stocks are coming under pressure internationally, Germany's benchmark index is benefiting from hopes of an economic recovery in 2027. Investors are betting on improving business prospects for Germany's export-oriented companies. However, this optimism is resting on an increasingly fragile foundation as elevated energy and import prices continue to drive up corporate costs.
