The DAX is expected to open Friday’s session at around 25,444 points. The lead from Asia is relatively subdued, with major markets in China and South Korea closed for holidays. In Japan, exporters are benefiting from the persistently weak yen, while rising Japanese government bond yields are increasingly becoming a drag on the equity market.
In Europe, fresh diplomatic signals surrounding the conflict with Iran could provide some relief. Talks about a possible reopening of the Strait of Hormuz could ease some of the pressure on oil prices following their recent sharp rise. For investors, this remains a crucial factor. Any easing in the oil market immediately reduces inflation concerns and, in turn, pressure on bond yields.
Ahead of the weekend, however, investors are likely to remain cautious and highly selective. Energy prices and bond yields remain the two key drivers for equity markets. At the same time, the GfK Consumer Climate Index came in significantly weaker at minus 30.6 points, compared with expectations of minus 27.2. Consumer reluctance in Germany therefore remains pronounced and could weigh on consumer-related stocks.
Many investors had hoped for more from the meeting between the US and China. There were no major breakthroughs, although the existing trade truce was extended until January. In the current environment, that should not be underestimated. Sometimes, the absence of fresh bad news is already good news for equity markets. Relations between the world’s two largest economies therefore remain, at least for now, one of the few geopolitical constants.
