The Dax index started the trading day on a positive note on Tuesday morning, with the benchmark index calculated at around 22,790 points by 9:30 am, just a few points above the previous day’s closing level.
Investors’ attention is likely to shift to Riyadh on Tuesday, with talks between the US and Russia on the agenda.
“The hopeful peace negotiations for Ukraine have sparked a real joy in the Dax” said Jochen Stanzl, chief market analyst at CMC Markets. “Global investors are rediscovering European stocks, fueled by the hope of an end to China’s economic downturn and the expectation that Russia’s war in Ukraine will end and Europe will still need to invest more in its own defense. Moreover, European stock valuations remain low, so investors are taking capital from the already overvalued and perfectly priced titles on Wall Street.” The result is a large-scale catch-up process for European stock markets.
“The long-term bullish trend of the Dax remains unbroken. Even in a global environment dominated by trade disputes, a robust buyer demand is visible. At the same time, warnings of short-term price corrections remain present. The technical indicators, which have become clearly overbought in strong uptrends, lose their significance as the prices continue to rise. The Dax ignores the warnings and continues to climb – a fact that apparently leads many investors to repeatedly try to build short positions.”
Additionally, the initially set price targets for the Dax by many major players were too pessimistic. Many asset managers were caught off guard and are now forced to rapidly increase their stock holdings to avoid disappointing their clients.
“From a technical perspective, it’s the case: if the Dax closes above 22,179 points at the end of February, a target of around 26,816 points could be in sight for the coming months. On the other hand, there is a possibility that after the German federal election a weaker stock market phase will set in and the index will fall below 22,179 points by the end of the month, which could lead to a more moderate price development in the spring. It remains to be seen how the month-end close will shape up and whether the current rally above the 22,179-point mark will turn out to be a bull trap” Stanzl said.
The European common currency was slightly weaker on Tuesday morning, with one euro costing around 1.0463 US dollars and one dollar being worth around 0.9557 euros.