The Dax index has made significant gains at the start of the week. The index closed at 20,216 points, a 1.6% increase compared to the previous trading day.
Infineon, Daimler Truck, and Sartorius were among the top performers, with automotive stocks generally in demand.
“Now that investors have digested the shock of the market reaction following the US Federal Reserve’s last interest rate cut, they are again enthusiastically buying into the new year” said Konstantin Oldenburger, a market analyst at CMC Markets. “The Dax is rising by over 200 points, reclaiming the 20,000 mark.”
The next test of the bulls, who are aiming for new all-time highs, lies in overcoming the 20,300-point hurdle. “That’s the point where not only the Dax but also the Wall Street indices reacted strongly to the Fed’s meeting and initially reversed their course.”
The market’s reaction to the Fed’s meeting in mid-December caused unease among investors, leading to a decline in the Christmas rally despite a strong start. The absence of a Santa Claus rally usually precedes a bear market. Two severe bear markets followed in 2000 and 2008, and a mild correction in 2016.
However, it’s still too early to predict a bear market, as there’s a chance for a strong month to turn the tide.
“Another key driver of today’s rally was the news that the designated US President Donald Trump is considering tariffs, but only on critical imports, not a blanket approach on everything. This has led to a significant decline in the US dollar, making the euro’s weakness appear temporary. The initial market reaction shows that investors are taking this development with a sense of relief” Oldenburger said.
The euro was stronger in the afternoon, with one euro costing $1.0400 and one dollar worth $0.9615 euros.