The overall market backdrop has changed little since the start of the week. Investors are simply assigning different weight to the familiar headwinds from one session to the next. Oil prices, bond yields and inflation currently form the three pillars of fear for equity markets.
The three factors are closely interconnected. High oil prices fuel inflation concerns, which in turn increase pressure on central banks and push bond yields higher. Unless this chain is broken at least at one point, the scope for a sustainable equity rally will remain limited.
In Asia, developments in the AI sector once again caused nervousness. In particular, Anthropic’s indications regarding its future growth prospects following its IPO are making investors more cautious. Following recent doubts over developments at OpenAI and concerns about the high level of investment in AI data centres, the list of question marks surrounding the AI hype is growing. The Nikkei and Kospi responded accordingly with losses.
In Europe, markets are initially expected to open around the previous day’s levels. Hopes of further diplomatic progress in the Middle East are keeping investors interested in equities. The stock market currently finds itself in an unusual position: the risks are not diminishing, but investors are not yet prepared to turn their backs on equities either. Fresh momentum will therefore increasingly require a tangible catalyst to break the current stalemate.
Today’s agenda picks up somewhat and will be dominated primarily by various sentiment indicators. They could provide further clues as to how strongly high energy prices, rising yields and geopolitical uncertainty are already affecting businesses and consumers. From a technical perspective, the DAX is expected to trade within a range of 25,300 to 25,550 points today.
