The German DAX index commenced Tuesday’s trading session with marginal gains, signaling a fragile recovery amidst persistent underlying concerns. By 9:30 AM, the benchmark index stood at approximately 23,270 points, a modest 0.1% increase from the previous day’s close. Infineon, Rheinmetall and Airbus led the gains, while SAP, BMW and Brenntag lagged at the bottom of the performance list.
However, the DAX’s brief upturn underscores a widening disconnect with Wall Street’s momentum, according to Thomas Altmann of QC Partners. “The week’s opening was successful for the DAX, but it again struggles to keep pace with the speed of the US markets” Altmann observed, characterizing the day’s performance as “only a mini-recovery” in an international comparison. This continues to keep the DAX positioned below its critical 200-day moving average, suggesting a lack of conviction among investors.
This atypical performance casts doubt on the market’s adherence to historical patterns. Traditionally, the year-end rally tends to peak in November, a month with a historically positive track record. Examining the last 29 Novembers, a substantial 21 have concluded with gains, contrasting with just eight negative outcomes. Concerns now arise, as the DAX remains deeply in negative territory for the current November, potentially undermining the anticipated seasonal boost.
Crucially, market sentiment remains heavily influenced by expectations surrounding Federal Reserve monetary policy. The probability of a Fed interest rate cut in December is now widely assessed at approximately 75%, fueled by a perception that the central bank will prioritize addressing the weakening labor market over concerns about persistent inflation. This shift in perceived risk aversion highlights the Fed’s potential to be swayed by economic indicators and how that impacts global market behaviour.
The euro strengthened slightly in early Tuesday trading, fetching $1.1526, equivalent to 0.8676 euros per dollar. Meanwhile, the price of Brent crude oil declined, falling to $63.12 per barrel – a decrease of 25 cents or 0.4% compared to the previous day’s close. This downward pressure on oil prices may reflect broader concerns about slowing global economic growth, adding a further layer of complexity to the market outlook and limiting optimistic momentum.