The DAX, Germany’s leading stock index, began trading on Friday morning with a slight decline. As of approximately 9:30 AM, the index was calculated at around 23,805 points, a decrease of 0.5 percent from the previous day’s closing level.
Jochen Stanzl, Chief Market Analyst at CMC Markets, noted a noticeable pullback in investor interest in buying stocks around the 24,000 point mark. He attributed this to the typical “summer slump” in market activity. While investors remain attentive to developments regarding trade with the United States, Stanzl cautioned that if resistance holds below the round number and positive news on trade negotiations remains absent, initial selling pressure could emerge in the coming hours and days.
Analysts had anticipated a renewed push towards record highs, a strategy considered somewhat risky given the seasonal tendency for weaker market performance. Stanzl suggested that a failure to sustain the rally could lead to disappointment.
Meanwhile, President Trump’s spending package successfully passed through the House of Representatives. The legislation includes tax cuts primarily for large corporations and high-income earners, financed by significant reductions in healthcare spending. Despite these measures, the package is projected to result in a new record national debt, with funds earmarked for bolstering police and customs authorities, including the ICE.
Stanzl stated that the debt ceiling is unlikely to be a near-term concern, nor is the prospect of government shutdowns. He believes this is positive for equities and provides increased planning certainty. However, he expressed concern over the legislative process, noting the bill’s passage with a narrow majority and through a bookkeeping maneuver.
The reconciliation process allows for deficit increases only within a specific timeframe. By calculating the extension of Trump’s previous tax cuts as zero, lawmakers created fiscal space for other tax relief and an increased debt ceiling.
Stanzl argued that this accounting method undermines investor confidence in US Treasury bonds. He warned that manipulating budget calculations for political expediency erodes the credibility of fiscal planning, which was evident in the recent surge in bond yields ahead of the holiday.
In currency markets, the euro showed slight strength on Friday morning, trading at $1.1779, with one US dollar equivalent to 0.8490 euros.