The German DAX index experienced a notable downturn on Friday, closing at 23,958 points – a 0.7% decrease from the previous day’s close. This decline follows a sluggish trading day, marking a potential shift in investor sentiment after a ten-month rally this year.
While robust quarterly results from US tech giants Apple and Amazon continue to propel Wall Street indices towards record highs, the Frankfurt Stock Exchange appears hesitant, according to Christine Romar, Head of Europe at CMC Markets. Despite a week punctuated by positive earnings reports from established German companies including Deutsche Bank and Mercedes-Benz, investor enthusiasm remains conspicuously absent. The gains within individual stocks were insufficient to galvanize the broader investment community, suggesting a pervasive sense of lethargy.
Romar’s assessment implies a potential cooling period for the DAX, highlighting the index’s ability to withstand typical correction months – September and October – and noting its impending entry into the second half of the trading year. However, she cautions that the DAX may require additional momentum before the traditionally anticipated year-end rally, commonly starting in mid-November, can fully materialize. This cautious outlook raises questions regarding the resilience of the German economy against a backdrop of global economic uncertainty.
During the trading session, shares of Merck, Qiagen, Siemens Energy and Commerzbank led the price list, while Allianz shares registered at the bottom. This disparity underscores the uneven performance within the DAX constituents, hinting at underlying vulnerabilities within specific sectors.
The downward trend extended beyond equities, with a decline in European gas prices – trading at €31 per megawatt-hour for December delivery, down 1% from the previous day. This translates to a potential consumer price of approximately 8-9 cents per kilowatt-hour, should this level persist. Similarly, the price of Brent crude oil dropped slightly, hovering around $64.98 per barrel.
Adding to the cautious macroeconomic environment, the Euro also depreciated against the US dollar, trading at $1.1537. This weakening currency presents a potential challenge for German exporters and could exacerbate inflationary pressures within the Eurozone. The overall picture reveals a market grappling with a confluence of factors, leaving open the question of whether the DAX can regain its upward trajectory and sustain the gains achieved earlier this year.