The DAX gained on Tuesday, closing the trading session at 25,449 points, representing an increase of 0.8 percent compared to the previous day’s close. Following a positive start, the index managed to hold onto its gains throughout the day.
Despite the increase, Andreas Lipkow, Chief Market Analyst at CMC Markets, commented that investors are taking a step back ahead of the US earnings season. “Although falling energy prices and a pause in bond yields provide some relief, the willingness to take on larger risks remains low. Investors want to remain invested, but they are reluctant to shoulder every risk,” Lipkow noted.
Lipkow also suggested that the ADP data concerning the US labor market is unlikely to significantly alter this trend. While the figures indicating 23,750 new jobs were slightly better than anticipated, they do not provide a clear direction given the recently contradictory signals from the US job market. Following the weak official labor market data released on Friday, uncertainty about the true health of the economy remains high.
In the Eurozone, retail sales disappointingly climbed by only 0.1 percent, the analyst explained. “This means the fundamental recovery in consumption remains intact, but high energy prices are curbing dynamism. These are currently the two biggest pain points for investors: long-term bond yields and the Middle East, due to their direct effects on energy prices and inflation.”
The approaching corporate earnings season is expected to be the next major test. “PepsiCo and Delta Air Lines will provide initial insights this week, while preliminary data from TSMC will be particularly important for the technology sector,” Lipkow stated. “After weeks dominated by macroeconomics, corporate profits must now increasingly provide the arguments for further stock price increases. Until then, trading is likely to continue in relatively calm waters.”
During trading, Hochtief and Continental led the gains, while Rheinmetall shares finished at the bottom of the list.
On the commodities side, gas prices rose, with a megawatt-hour (MWh) of November gas trading at 75 Euros, a three percent increase from the previous day. If this price level remains stable, this implies a consumer price of at least around 12 to 15 cents per kilowatt-hour (kWh), including ancillary costs and taxes.
Conversely, the price of oil fell significantly. A barrel of North Sea Brent crude traded at $98.37 on Tuesday afternoon (around 5 PM German time), which was 195 cents, or 1.9 percent, less than the close of the previous trading day.
The European currency also showed strength on Tuesday afternoon, with the Euro trading at $1.1266, meaning a dollar could be purchased for 0.8876 Euros.
