The German DAX index surged at the start of the trading week, propelled by renewed optimism surrounding the ongoing US budget negotiations. Closing at 23,954 points, the index registered a significant 1.6% increase compared to the previous day’s close. Shares of Commerzbank, Siemens Energy and Deutsche Bank experienced particularly strong gains, reflecting a broader shift in investor sentiment.
Analysts attribute the rally, at least in part, to the receding threat of a US government shutdown. “The hope for a swift resolution in the US has temporarily overshadowed concerns about inflated valuations in large technology companies caught up in the AI hype” noted Christine Romar, Head of Europe at CMC Markets. While acknowledging that a final agreement remains elusive, Romar emphasized that progress in the Senate offers a measure of relief, albeit a fragile one. The prospect of a potential market correction, fueled by overvalued assets, lingers as a significant underlying risk.
The Frankfurt DAX capitalized on this shift in mood, briefly reclaiming the 24,000-point threshold. However, investor attention remains fixed on New York, where technology stocks have been experiencing volatility. A potential compromise in Washington offered a glimmer of hope, prompting a rebound that could extend in coming days. The DAX’s ability to sustain this upward trend will depend on continued positive momentum from across the Atlantic.
The recent resilience of the 23,500 level has served as a crucial support for the DAX, fostering a sense of stability that could embolden investors to re-enter the German stock market during this traditionally strong seasonal period.
However, the underlying concerns about the health of the German economy continue to cast a shadow on the rally. “The robust performance of the DAX is, to a certain extent, disconnected from the realities of Germany’s economic situation” Romar cautioned. Compared to the vibrant performance of US counterparts, the current earnings season in Germany has been decidedly more muted. While solid, German corporate performance alone may prove insufficient to keep pace with the escalating valuations seen in New York.
The euro weakened slightly on Monday afternoon, trading at $1.1548, or €0.8660 per dollar. Gold prices surged, reaching $4,091 per fine ounce (+2.3%), equivalent to €113.91 per gram. Conversely, oil prices declined, with Brent North Sea crude falling to $63.39 per barrel, representing a 0.4% decrease from the previous day’s close. The overall trajectory of these markets remains reliant on resolving the deeper structural issues underlying the current economic uncertainty.
