The German DAX index edged slightly higher to close Friday at 24,240 points, representing a 0.1% increase from the previous day’s close. While initial optimism stemming from unexpectedly positive US inflation data briefly buoyed the market, the relief proved short-lived, according to Christine Romar, Head of Europe at CMC Markets.
The market had already priced in a significant number of Federal Reserve interest rate cuts following the delayed release of the US inflation figures; consequently, the surprise element was limited. Wall Street indices, however, managed to maintain their gains, providing a potential tailwind for the DAX early next week.
Romar suggested that if this trend continues, the DAX could resume its upward trajectory toward previous all-time highs, potentially allowing investors to avoid losses from the typically weaker months of the year and focus on a potential year-end rally. However, navigating the week ahead will present challenges.
Crucially, five heavyweight US technology companies – Microsoft, Meta, Alphabet, Apple and Amazon – are scheduled to release their earnings reports on Wednesday and Thursday. These results, coupled with their future outlooks, have the potential to significantly impact not only their own stock performance but also broader market sentiment and index performance. Following a week of somewhat underwhelming reports from Netflix, Tesla and SAP, a degree of caution and restraint may characterize the early part of the week.
On the Frankfurt exchange Friday, Siemens Energy led the gainers, followed by Heidelberg Materials, Siemens and Commerzbank. SAP shares brought up the rear.
Energy markets witnessed contrasting movements. Natural gas prices declined, with November delivery falling to €32 per megawatt-hour, a 2% decrease. This translates to a consumer price of approximately 8-9 cents per kilowatt-hour if sustained. Conversely, the price of Brent crude oil rose to $66.62 a barrel, a 1% increase.
The euro strengthened slightly to $1.1633, meaning a dollar was worth €0.8596. The market’s reaction to next week’s corporate earnings could prove pivotal, highlighting the delicate balance between positive economic data, market expectations and underlying investor sentiment. The potential for volatility remains considerable as investors scrutinize the performance and guidance of these tech giants.
