30 AM.. This level was only slightly above Friday’s closing value. Leading the gains were BASF, Siemens and Heidelberg Materials, while FMC, Commerzbank and Rheinmetall were among the day’s weakest performers.
“Uncertainty surrounding trade policy continues to escalate” commented Jochen Stanzl, Chief Market Analyst at CMC Markets. “Even if a resolution is reached between the European Union and the United States, the most likely outcome would be a framework agreement. Further negotiations on specific details would inevitably be required. Realistically, the probability of continued uncertainty persists even after August 1st. Investors may be placing an overly optimistic expectation on a potential deal with the U.S.
Stanzl suggested that market sentiment had become overly optimistic too quickly. Sentiment analysis indicates a potential cooling of the market and recent DAX movements appear suspect. “The record high reached on July 10th now appears, with the benefit of hindsight, to resemble a potential ‘bull trap'”. Momentum has not continued since that peak.
Confirmation of such a “bull trap” would manifest if the DAX were to fall below the 24,000-point mark, potentially triggering a trend reversal and more substantial price declines. This scenario would align with seasonal patterns. In a worst-case scenario, this could cost the DAX as much as ten percent. A downward movement into the 21,000 to 22,000-point range is also conceivable with a moderate correction.
Multiple factors could contribute to a decline in the DAX. The European Central Bank is not expected to further reduce key interest rates this Thursday and might signal a pause. The upcoming earnings season could also deliver disappointments due to lingering trade uncertainty, geopolitical tensions and the strengthening Euro.
Conversely, Stanzl noted, “If the DAX remains above 24,000 points and even reaches new highs, the risk of a trend reversal would recede”. Much now depends on the strongest companies within the DAX, demonstrating their ability to compensate for weaknesses in other sectors. “Whether they can achieve this remains to be seen; the upcoming balance sheets will provide clarification.
The Euro was slightly stronger on Monday morning, trading at $1.1642, with a US dollar fetching €0.8590.
Oil prices saw a slight decline, with a barrel of Brent North Sea crude trading at $69.17 around 9:00 AM local time – an 11-cent, or 0.2 percent, drop from the previous day’s closing value.