Thursday saw a modest uptick for the German DAX index, closing at 24,208 points – a 0.2% increase compared to the previous day’s close. The initial trading session saw the index dip below the prior day’s level, before recovering and trending upwards in the afternoon. However, the underlying sentiment reflects growing anxieties regarding the sustainability of high-growth rates in the technology sector.
The subdued reaction to SAP’s earnings release, echoing concerns previously voiced regarding Netflix and Tesla in the US, highlights a shift in investor expectations. As Christine Romar, Head of Europe at CMC Markets, observed, the easy outperformance seen in the past is losing its automatic appeal. Companies are now finding it challenging to consistently exceed already-inflated expectations.
Adding further complexity, the inability of New York indices to reclaim their pre-Trump trade war records raises questions about the longevity of the nearly three-year bull market. Analysts are closely monitoring the coming week, when five of the so-called “Magnificent Seven” tech giants will report earnings and provide future-looking guidance. This cohort’s performance will likely be a decisive factor in determining whether the bull market can sustain its trajectory, or if a more prolonged pause is imminent.
Within the DAX, Siemens Energy led the gainers, while Infineon and Deutsche Telekom lagged at the bottom of the leaderboard, illustrating the segmented performance within the index.
Beyond equities, significant developments in energy markets are contributing to broader economic uncertainties. Natural gas prices surged, reaching €32 per megawatt-hour for November delivery – an increase of 2% from the previous day. This price point suggests consumer electricity bills could remain elevated, potentially exceeding 8-10 cents per kilowatt-hour, factoring in taxes and levies. An equivalent spike in oil prices saw Brent crude reaching $65.61 per barrel, a 4.8% increase.
The euro also weakened slightly against the US dollar, trading at $1.1609, suggesting a potential dampening effect on German exports and further complicating the economic outlook. The confluence of these factors – tempered tech optimism, struggling indices in the US and rising energy costs – signals a potentially fragile period for European markets and suggests caution amongst investors.