Frankfurt’s DAX index edged upwards on Tuesday, closing at 24,088 points, a 0.5% increase from the previous day’s close. Gains were led by Bayer, Merck and Vonovia, while Continental, Rheinmetall and RWE experienced declines. However, analysts suggest the rally’s momentum is proving fragile, overshadowed by underlying anxieties regarding the US economy and potential market instability.
While initial optimism surrounding a potential resolution to the ongoing US government shutdown briefly buoyed investor sentiment, that enthusiasm appears to have swiftly dissipated. Christine Romar, Head of Europe at CMC Markets, noted the shutdown hadn’t been a significant drag on market performance previously, implying the current relief is more indicative of a return to routine trading rather than a fundamental shift in outlook.
The temporary easing of concerns surrounding a potential bubble in the US technology sector, albeit fleeting, underscores the precariousness of the current market position. Romar cautioned that these concerns remain “sweltering in the background” suggesting a minor catalyst could easily trigger another wave of selling. This fragility is demonstrably impacting the DAX’s ability to decisively push beyond the 24,000-point threshold. A palpable willingness to take profits at current levels is hindering upward progression and a lack of follow-through buying necessary for a year-end rally is compounding the issue.
The prolonged directional uncertainty – now spanning seven months – remains a significant challenge for the DAX. Analysts suggest a decisive shift will likely hinge on the imminent release of previously delayed US economic data following the shutdown’s resolution. This influx of revised figures, alongside an updated economic calendar, carries a considerable risk of introducing volatility and prompting investor caution. The sheer volume of information could prove disruptive.
The euro strengthened to $1.1596 on Tuesday afternoon, translating to €0.8624 per dollar. Simultaneously, oil prices saw a marked increase, with Brent crude fetching $64.98 per barrel – boasting a 1.4% increase from the previous day’s closing figure. This uptick in oil prices presents a contrasting signal, potentially reflecting wider geopolitical concerns or a speculative rebound despite broader market unease.