The DAX started the trading day on Thursday with slight losses. At around 9:30 AM, the major index was calculated at approximately 25,370 points, marking a 0.2 percent drop from the previous day’s closing level. Among the best-performing stocks were Zalando, Henkel, and MTU, while BMW, Rheinmetall, and Volkswagen registered the steepest declines.
Jochen Stanzl, Chief Market Analyst at Consorsbank, stated that the DAX is struggling under the strain of political uncertainty and the lingering effect of Volkswagen’s profit warning. He noted that the index, which exemplifies the structural weaknesses of the German economy for many international investors, continues to fall. Having already lost 10 percent this week, it is bringing the automotive sector within the DAX down with it. Stanzl suggested that, in the best-case scenario, the DAX has merely established a new, lower trading range between 25,300 and 25,800 points. However, he cautioned that, in the worst-case scenario, the current ten-day sideways trend could just be a brief pause before a further decline.
Stanzl further added that a fresh wave of selling is sweeping through global bond markets. Despite the hope that investors could mitigate concerns about rising yields, another sell-off appears imminent. The yields on ten-year US Treasury bonds reached a new 19-year high, and yields on five-year terms surpassed the five percent mark for the first time since 2007.
The analyst pointed to a positive development, however: the yield spread between long-term and short-term bonds is narrowing. He views this flattening of the yield curve as a clear signal from the market that it believes in the effectiveness of the US Federal Reserve’s anti-inflation efforts. While yield increases are still occurring, they are doing so in a more orderly fashion than they were two or three weeks ago. Stanzl concluded that this represents genuine progress, as the nervousness caused by sharp yield hikes is now having less severe repercussions on the stock market.
