The DAX is expected to open Thursday's trading session at around 25,730 points. However, cues from the US and Asian markets are sharply contrasting. The Federal Reserve (Fed) left interest rates unchanged as expected and softened its recently restrictive tone somewhat. This is providing at least some relief on the monetary policy front. At the same time, the sharp market reactions to the latest quarterly earnings demonstrate just how nervous investors remain despite the generally positive performance of equity markets.
The technology sector, in particular, is presenting a mixed picture. While results from Alphabet and ServiceNow were met with a decidedly negative response, Microsoft and eBay managed to impress investors. Scepticism also prevailed across Asian markets. Even better-than-expected results from Samsung Electronics failed to prevent a sell-off in its shares. The message is clear: strong quarterly earnings alone are no longer enough. Investors want to know whether the exceptionally high growth rates of recent quarters can be sustained. Markets are increasingly pricing in the risks of tomorrow rather than rewarding the successes of yesterday.
For the German equity market, the direct impact of the turbulence in technology stocks is likely to remain limited. Instead, attention will focus on today's quarterly results from Volkswagen, Henkel and Adidas. These also paint a mixed picture, highlighting how differently companies are coping with the challenging economic environment. However, the upcoming interest rate decision from the European Central Bank (ECB) is likely to prove even more important.
Although the ECB is also expected to leave interest rates unchanged, its communication will be particularly significant given persistently high energy prices. Policymakers must weigh the risk of another inflationary surge against the additional monetary policy pressure that an already fragile European economy could withstand. Following the Fed's somewhat more relaxed tone, investors will be watching closely to see whether the ECB also adopts a more cautious stance or places greater emphasis on inflation risks.
