Strong performance by DAX: Heidelberg's pressure soars, MTU thriving, DHL lags behind
The German stock market, represented by the DAX, had a comeback on Tuesday, closing 1.03 percent higher at 24,217 points. This recovery follows the new US-EU trade agreement, which has averted an immediate escalation into a full-blown trade war and boosted investor sentiment.
Key sectors such as aerospace and defense have benefited from this positive sentiment, with companies like MTU Aero Engines gaining 3.5 percent. TeamViewer, a software provider, also saw a significant rise of 5.2 percent due to a higher quarterly profit.
However, the DAX's recovery is fragile, with key resistance around 24,322 points and critical support near 23,380 points. Failure to hold above support could lead to renewed vulnerability.
The trade deal, which involves the EU accepting a 15% tariff while maintaining zero tariffs on strategic goods like aircraft, chemicals, pharmaceuticals, and semiconductors, has provided a short-term boost. Yet, long-term success depends on how well Germany’s economic fundamentals hold, how monetary policies evolve, and whether geopolitical uncertainties can be managed without undermining investor confidence.
Ongoing geopolitical tensions, particularly unresolved US-China trade disputes, continue to pose risks to global trade and supply chains, potentially dampening investor confidence and affecting export-dependent German companies. The interplay of monetary policies by the European Central Bank and the US Federal Reserve will significantly influence liquidity and capital flows, affecting risk appetite for European equities.
Some sectors face caution, such as semiconductor suppliers like Suess MicroTec and Siltronic, which have downgraded profit outlooks amid weak demand recovery. K+S also fell by over 10 percent after releasing weak numbers, with the operating margin remaining below expectations.
Meanwhile, the DAX is currently in a technical uptrend, approaching the critical 24,000-point level. Indicators suggest some bullish momentum tempered by weak overall trend strength, implying that further gains depend on sustained market conviction and macroeconomic support.
Fiscal stimulus, gains in the energy sector, and shifts in global capital flows continue to support the index recovery, while corporate earnings remain a focal point for investors. Select companies like Redcare Pharmacy and TeamViewer report positive earnings, indicating pockets of strength within the broad market.
Heidelberger Druckmaschinen, a company in the SDAX, soared over 30 percent following an unexpected announcement. The company is entering the defense technology sector through a partnership with Vincorion.
In the US, the Dow Jones and Nasdaq had mixed performances, with the Dow falling slightly and the Nasdaq remaining flat. Speculations about interest rate cuts are alive again, adding another layer of uncertainty to the global financial market.
Caution and selection remain the order of the day for the market, with the focus also on possible signals from central banks in the coming days. Despite the short-term boost from easing trade tensions, the structural risks remain in the market. The profit streak of Wall Street is under scrutiny in the coming week, and the market will continue to navigate these challenges with careful optimism.
The trade deal, involving a 15% tariff for specific goods while maintaining zero tariffs on strategic items like aircraft, chemicals, pharmaceuticals, and semiconductors, has temporarily boosted the DAX. With the recovery of key sectors like aerospace and defense, as seen in the 3.5% gain of MTU Aero Engines, and software providers like TeamViewer, positive earnings from select companies like Redcare Pharmacy and TeamViewer indicate pockets of strength in the market. However, the fragile DAX recovery relies on sustained market conviction, macroeconomic support, and careful management of geopolitical uncertainties, especially US-China trade disputes and interplay of monetary policies by global central banks.
