The DAX gained ground at the start of the week, closing at 25,278 points, representing a 0.8 percent increase compared to the previous trading day. In the stock market, Rheinmetall led the charge, seeing a strong rally of over two percent just before the close, followed by RWE and Zalando. Conversely, Infineon, Daimler Truck, and BASF finished at the bottom, each experiencing a sharp decline of over two percent near the market’s end.
Despite a pullback observed on Wall Street in the afternoon, Andreas Lipkow, Chief Market Analyst at CMC Markets, noted that the DAX managed to maintain its early-week gains throughout the trading day. However, he commented that the excitement regarding a potential return of Russia to international energy markets rapidly dissipated. Lipkow stressed that geopolitical uncertainties remain too widespread, while the actual relief experienced in energy prices and bond yields has been insufficient. He also pointed to France as a persistent concern for investors, due to the widening gap in yield differentials compared to German government bonds.
The challenges related to financing large-scale AI investments are also ongoing. Oracle corporate bonds, for instance, are increasingly under pressure, moving closer to the high-interest rate segment in terms of risk assessment. This raises the systemic question of how long hyperscale companies can fund their massive investments without increasing capital costs burdening their business models and valuations. Lipkow suggested that the current AI boom may not fail due to technological shortcomings, but rather due to the costs associated with its financing.
Furthermore, the upcoming reporting season is set to become a central focus. Lipkow highlighted that expectations for corporate earnings, particularly in the US, are exceptionally high. After weeks of rising yields and elevated energy prices, individual companies must now provide robust arguments to justify further increases in share prices. The earnings season is therefore expected to act as a litmus test for the stock markets; given the high valuations, companies can no longer simply meet expectations, but must pleasantly surprise investors to provide compelling purchase arguments. This makes the recent tranquility in financial markets quite fragile.
On other fronts, the European common currency weakened on Monday afternoon, with one Euro trading at $1.1166, meaning the dollar bought for 0.8956 Euros. The price of gold also showed weakness, trading at $4,168 per fin ounce (-0.6 percent) during the afternoon, equating to 120.00 Euros per gram. Meanwhile, the price of oil increased significantly. Brent North Sea crude cost $106.70 per barrel at 5:00 PM German time on Monday afternoon, a 1.9 percent rise from the close of the previous trading day.
