The DAX is expected to start the new trading week at around 25,220 points. Investors are facing a contrasting picture of light and shadow. While positive signals are coming from the US and Asia, the headwinds in Europe remain stubbornly persistent.
Asian equity markets were able to translate Wall Street’s positive lead into gains, with technology stocks in particular in demand. Friday’s weak US labour market data have significantly reduced the likelihood of another Federal Reserve rate hike. US Treasury yields also eased somewhat.
In Europe, by contrast, high French government bond yields remain a major headwind. They reflect investor concerns over French fiscal policy and the country’s high level of public debt. At the same time, elevated energy prices are keeping inflation concerns alive and are increasingly weighing on consumer spending through higher petrol prices. European equity markets therefore continue to lack the decisive relief needed for a more sustained recovery.
There could be some movement in automotive stocks at the start of the week. New sales figures in the electric vehicle segment point to a recovery and could provide at least a short-term tailwind for European manufacturers in particular. Whether this develops into anything more than a sector-specific move, however, remains to be seen.
The DAX therefore remains caught between opposing forces. Falling US yields and strong technology stocks are providing support, while high European yields and energy prices are simultaneously applying the brakes. A sustainable breakout will therefore require more than just a positive lead from Wall Street.
