The DAX is expected to open Friday's session at around 25,500 points. Following recent share price declines, investors are returning to technology stocks. Lower valuations have already attracted selective buying on Wall Street and across Asian equity markets. Support is coming from falling yields on ten-year US Treasuries, which have moved back towards the 5% mark.
However, it is still too early to speak of any fundamental easing of market tensions. Elevated energy prices remain a significant headwind amid ongoing military conflict in the Middle East and disruptions to supply chains. The recent unexpectedly sharp increases in US consumer and producer prices have demonstrated how quickly an energy price shock can feed through into inflation. Investors may be getting some relief from the bond market, but inflation risks remain as high as ever.
Another notable feature of the recovery is that technology stocks are once again leading the way, while cyclical sectors remain largely on the sidelines. Investors are therefore not buying the broader market but are selectively returning to the stocks that previously drove growth. A technical rebound following substantial losses does not yet amount to a sustainable trend reversal.
With no major economic releases scheduled, trading is likely to remain relatively quiet heading into the weekend. The key question will be whether the easing in bond yields continues and whether the recovery broadens to other sectors.
From a technical perspective, the DAX is expected to trade within a range of today.
