The DAX is expected to open significantly lower today, below 25,100 points. Positive leads from Asian markets are failing to provide any support for German equities. In particular, the renewed enthusiasm surrounding semiconductors following Micron Technology’s quarterly results is having little impact. The number of DAX companies directly benefiting from strong chip demand can still be counted on one hand.
This once again highlights a structural disadvantage of the German benchmark. While Wall Street and parts of Asia continue to benefit from the relentless AI and semiconductor story, the DAX captures only a fraction of that momentum. At the same time, it is fully exposed to the headwinds from high energy prices and rising bond yields.
Oil prices in particular remain a burden. Brent crude continues to trade at around $103 a barrel, above the psychologically important $100 mark. This is keeping concerns about renewed inflation pressures and increasing consumer caution alive. Yesterday’s US PCE data pointed to some easing in price pressures, but not enough to provide any lasting all-clear.
At the same time, prices of many government bonds continue to fall, pushing yields higher. This creates a double headwind for equities: financing costs for companies are rising, while bonds are becoming increasingly attractive as an investment alternative. As long as yields continue to rise, this mechanism is likely to act as a ceiling on equity markets.
Markets therefore find themselves in an increasingly divided environment. AI euphoria continues to fuel strong growth expectations, while oil prices and bond yields are simultaneously undermining the valuation case for equities. The longer these two worlds diverge, the more vulnerable markets become to larger swings. From a technical perspective, the DAX is expected to trade within a range of 24,950 to 25,300 points today.
