The DAX index registered a slight gain on Tuesday, closing at 25,421 points, a 0.1% increase from the previous day’s close. While the index initially dipped into negative territory after a modestly positive opening, it briefly reached a new all-time high of approximately 25,508 points around 3:17 PM local time before retracting a significant portion of those gains.
Christine Romar, Head of Europe at CMC Markets, attributed the record peak to US inflation data released Tuesday afternoon, which largely met expectations. While the reported inflation rate of 2.7% overall and 2.6% for the core rate, remains above the Federal Reserve’s target, it has simultaneously quelled fears of a renewed acceleration in inflationary pressure. Romar noted, however, that the data’s reliability is being questioned, given the nearly six-week period during the recent government shutdown when data collection was effectively suspended. This raises concerns about the completeness and accuracy of the reported figures.
The prevailing narrative suggests continued inflows of capital into the stock market since the beginning of the year are driving the DAX to its sixth all-time high in just eight trading days. Romar further suggested that this early-year performance may foreshadow a fourth consecutive bull year for the German benchmark index. The sentiment among investors, despite three exceptionally strong years for the stock market, appears to be one of continued bullishness, with a seeming disregard for potential corrections, particularly among those with a long-term investment horizon. This collective memory appears dulled by the extended period of positive returns.
Trading saw Symrise and Zalando top the Frankfurt stock exchange leaderboard, while Deutsche Telekom, Continental, Fresenius Medical Care and Heidelberg Materials lagged at the bottom.
Beyond equities, energy prices are exhibiting signs of upward pressure. Natural gas futures for delivery in February reached €31 per megawatt-hour (MWh), a 4% increase compared to the previous day. This price point implies a consumer cost of roughly 8 to 10 cents per kilowatt-hour (kWh), inclusive of levies and taxes, should this level prove sustained. Similarly, Brent crude oil experienced a relatively steep price surge, reaching $65.70 per barrel, a 2.9% increase from the previous day’s closing value.
The euro weakened against the dollar on Tuesday afternoon, trading at $1.1636, effectively valuing a dollar at €0.8594. The broader implications of these developments – particularly the muted reaction to inflation data and the rising energy prices – highlight a complex and potentially fragile market environment, raising questions about the sustainability of the current bullish momentum and the underlying assumptions supporting it.
