The DAX is expected to open at around 25,330 points. Investors have now digested the quarterly results from the major US banks and reached a sobering conclusion: the numbers were good, but not good enough to justify further share price gains. Initial advances in JPMorgan, Goldman Sachs and other banking stocks were therefore quickly sold off.
A similar picture is emerging at semiconductor equipment manufacturer ASML. Despite solid financial results, the company's outlook failed to convince investors. Scepticism surrounding elevated technology sector valuations is growing. In particular, the hyperscalers' multibillion-dollar investment programmes are coming under increasing scrutiny. Investors no longer simply want to know how much money is being invested in AI, but when those investments will actually start generating returns. The earnings season is therefore increasingly becoming a moment of truth for the AI-driven rally.
Some support is coming from better-than-expected Chinese trade data and a smaller rise in consumer prices. However, the fundamental headwinds remain firmly in place: elevated energy prices and attractive government bond yields. Some major asset managers are already beginning to withdraw capital from equities and reallocate it to US Treasuries. What has so far been competition between equities and bonds could increasingly turn into a genuine shift in capital flows.
For equity markets, this would represent a dangerous paradigm shift. When even strong corporate earnings fail to attract buyers while government bonds offer attractive yields, the scope for further equity gains becomes increasingly limited. Fresh catalysts could come today from US consumer price data and the Federal Reserve's Beige Book. For now, the DAX is expected to trade within a range of 25,250 to 25,500 points.
