European markets exhibited a downturn Friday, with the German DAX index closing significantly lower after a volatile trading day. The index finished at 23,092 points, a drop of 0.8% compared to the previous day’s close, reflecting broader anxieties surrounding valuations and the influence of US market performance.
Market analysts attribute the decline not to external geopolitical shocks – the kind that previously triggered reactive market rallies – but to a growing sense of unease regarding the sustainability of current price levels. “The automatic bounce-back we’ve seen in recent months, often fueled by President Trump’s trade rhetoric and the subsequent ‘Taco Trade’ response, appears to be suspended” stated Christine Romar, Head of Europe at CMC Markets. She highlighted that this correction is fundamentally driven by investor concerns about stretched valuations and a recognition that prices have ascended too rapidly. The recent earnings report from Nvidia, despite initially appearing positive, failed to quell these concerns, raising questions about what further developments are necessary to restore market confidence.
The lack of a near-term interest rate cut by the Federal Reserve is also contributing to the prevailing sentiment. Strong recent labor market data make a December rate reduction unlikely and the Fed is expected to hold off until January, pending further data releases. Furthermore, the next earnings season, which would provide a benchmark for justifying higher valuations through increased profits, remains some time away.
The subdued performance of the DAX signals a potential shift in investor behavior and a period of increased scrutiny on company valuations. While Deutsche Börse and Symrise managed to rank among the top performers, Rheinmetall and Siemens Energy lagged behind, demonstrating broad-based weakness.
Beyond equities, energy prices also saw a decline. Natural gas prices fell by 3%, with a megawatt-hour for December delivery costing €30, potentially translating to a consumer price of 7-9 cents per kilowatt-hour. Brent crude oil followed suit, dropping almost 2% to $62.16 per barrel. The euro also weakened to $1.1496, reflecting broader economic uncertainties.