The Dax index began the trading day on Thursday with gains, continuing its record-breaking streak. By 9:30 am, the index was calculated at around 22,345 points, a 0.9% increase from the previous day’s close. Siemens, BMW and Mercedes-Benz led the list, with Rheinmetall, MTU and Deutsche Telekom at the bottom.
“Right now, it’s almost like the US market in the Dax: artificial intelligence is driving the index up because companies have shown that they can profitably and growthfully employ it” said Jochen Stanzl, chief market analyst at CMC Markets. “Investors are once again willing to pay a higher valuation premium for every euro of profit that these companies make.”
This is also due to the plans of the German stock exchange. “The idea of introducing a new Dax parallel to the current one, which would lift the previous cap on SAP, is fueling investors’ imagination on the trading floor” Stanzl said. Such an index could function similarly to US indices, in which individual, successful companies, including those that profitably employ artificial intelligence, can rapidly grow to enormous market valuations. “It’s not unlikely that SAP will become the first listed company in Germany with a market capitalization of half a billion euros.”
“The recently published US inflation figures showed no continuation of the decline in core inflation seen in the previous month” the market expert added. Many believed that this was only the beginning and tariffs could continue to drive prices higher. “Given the current inflation data, it’s questionable whether the Fed can actually implement its planned two rate cuts by 2025.” The market is currently only pricing in a single step. “The data from yesterday led to a delay of a month in the expected rate cut.”
Although short-term volatility remained a dominant theme, the long-term market direction was primarily driven by the fact that the trend of inflation was still expected to be declining, Stanzl said. “Investors are buying every dip and that’s also contributed to the fact that the turbulence was short-lived. Investors are focusing on the opportunities and ignoring the risks – a typical behavior for a strong and intact bull market.”
The European common currency was stronger on Thursday morning: one euro was worth 1.0423 US dollars and one dollar was worth 0.9594 euros.
Meanwhile, the oil price fell: a barrel of Brent crude cost around 74.50 US dollars at 9 am German time, a decrease of 68 cents or 0.9% from the previous day’s close.