FRANKFURT (dpa-AFX) - The DAX has remained in record mood over the past few trading days. Neither the prophecies of doom about the state of the German economy, nor the concerns about the economic policy of the new US government and certainly not the polls on the Bundestag elections have so far knocked the German market off its stride.
The conditions for further gains are therefore good. Especially as market-specific mechanisms are coming into play that are fueling the rise. The soaring German blue chips have caught many market participants on the wrong foot and are now forcing them to buy.
"As we are hearing from the market, not only are many investors barely in, but numerous players have recently even built up large short positions," says broker Index Radar. "As prices continue to rise, short positions must be closed in order to limit losses." This additional buying is driving prices higher and higher.
This development is not least due to the fact that the worst fears about the new US government have not yet materialized. "Both Canada and Mexico will have to expect higher tariffs, and verbal salvos have also been fired in the direction of China and Europe with the announcement that imports will soon be subject to levies," notes portfolio manager Max Hanisch from Weberbank. "However, President Trump revealed all these threats only when asked; the statements were vaguely formulated and indicated that there is apparently no finalized course of action yet."
The euphoria on the markets does, of course, have its downside. "The DAX has already gained eight per cent since the beginning of the year, and the new year is just three weeks old," emphasizes capital market strategist Jürgen Molnar from broker RoboMarkets. "From a technical perspective, however, the index has reached an extreme zone in which sharp corrections can occur at any time and unexpectedly."
But what could trigger this correction? In addition to the Wall Street data, economic data has the potential to at least dampen the euphoria. After all, things are still not looking too good in Germany, even if the latest data is slightly better than expected.
"The mood in German industry remains gloomy despite the unexpectedly strong rise in the Purchasing Managers' Index in January," warn the economists at Hessische Landesbank. The index is still well below the expansion threshold.
It is therefore questionable whether the ifo business climate index will bring a positive surprise on Monday. "The mood among companies in Germany is poor, and this is unlikely to have changed fundamentally in January," says Ulrich Kater from Dekabank skeptically. The chief economist forecasts that the ifo business climate will remain largely stable at a low level.
In addition, the inflation trend is unlikely to ease for the time being. "Overall, we expect the consumer price index to rise by 0.3 percent in January compared to the previous month and 2.8 percent compared to the previous year," forecast the economists at Hessische Landesbank for the price data on Friday.
It also remains to be seen whether the European Central Bank (ECB) will be able to stimulate the markets. The potential for surprises at Thursday's meeting is at least manageable. An interest rate cut is just as likely as further steps in the course of the year.
In this context, the experts at Landesbank Baden-Württemberg (LBBW) refer to statements by ECB President Christine Lagarde, according to which "interest rates will be gradually lowered further." LBBW expects up to five steps of 0.25 percentage points each, bringing the deposit rate to 1.75% by the end of 2025.
The reporting season was more likely to set the tone. SAP, by far the most valuable DAX company, will present its figures on Tuesday. Analysts are confident. According to a sentiment survey conducted by the Group, experts expect an average increase in total sales of 7 percent to 9.1 billion euros for the fourth quarter. According to estimates, the operating result should climb by 14 percent to 2.25 billion euros.
However, after the soaring share price, the software manufacturer must also meet these expectations with confidence. How sensitively the stock markets react to mistakes in business development, especially in the case of well-performing stocks, has been demonstrated time and again recently. This is all the more true as it is not just SAP that is reporting.
With Microsoft, Meta, Tesla and Apple, several very large US tech stocks are due to report figures in the coming week, which could influence sentiment on the global stock markets at any time./mf/tih/jha/
--- By Michael Fuchs, dpa-AFX ---