The German benchmark index, the Dax, remained in negative territory on Tuesday afternoon, following a weak start to the day. Around 12:30 PM, the index was calculated at 25,950 points, representing a decrease of 0.2 percent compared to the previous day’s closing level. The companies leading the gainers included Fresenius, Volkswagen, and BMW, while Infineon, Münchner Rück, and Hannover Rück finished among the decliners.
Andreas Lipkow, Chief Market Analyst at CMC Markets, noted that the effort to regain the 26,000-point level is becoming increasingly difficult for the Dax. He pointed out that the market sentiment is heavily influenced by rising oil prices, comparing the effect to lead weights. Crude Brent oil has once again surpassed the $100 mark. The subsequent price increases are pressuring consumer confidence while simultaneously forcing central banks to consider interest rate hikes.
According to Lipkow, neither of these factors presents a compelling argument for buying stocks, particularly because high bond yields offer a genuine investment alternative to equity. He observed that many asset managers are already contemplating shifts in portfolios, leading to capital outflows from equity markets.
“The combination of geopolitical challenges, rising energy costs, and supply chain disruptions speaks against a continuation of economic recovery in Europe, and specifically in Germany,” Lipkow added. He concluded that the nation’s high reliance on raw materials is straining companies, forcing them to contend with falling profit margins that cannot be effectively absorbed in the medium term through further staff reductions or other cost-cutting measures.
Meanwhile, the Euro was slightly weaker during the day, with one Euro trading at $1.1611, and the dollar exchanging for 0.8613 Euros.
