By Herbert Rude
DOW JONES–The end of the 5-week consolidation in the DAX has given the starting signal for another round of rally. The DAX could now approach the target range between 21,200 and 21,500 points relatively quickly, as various market analysts say. The current rally could also carry the DAX even further, because its fundamentals look significantly more stable than those of the upward trends last year: “It’s getting even better,” says one market participant.
He refers to the breadth of the market. Last year, the bullish waves were mainly driven by relatively few stocks: SAP, Siemens, the insurance stocks and the relatively low-weighted stocks Rheinmetall and Siemens Energy. At times, the DAX even rose against weakening cyclicals in the automotive and chemical industries. But this picture is now changing.
The car stocks have now broken their bearish trends, the chemical stocks are also jumping and the banks are already on a bullish course. At the same time, the old favorites continue to run. This suggests that the new bull market wave is on much broader footing and could be characterized by an upward rotation. There is currently skepticism in the market, especially about selected retail and consumer stocks. Because the pay slips for January will come as a negative surprise to many employees: despite higher allowances, many employees are likely to have less net left over gross due to the escalating social security contributions.
More positive tones from the Trump environment – Fed’s independence emphasized
The coming week is likely to be dominated by the inauguration of Donald Trump. Recently there have been significantly more positive signals from the designated US government: the tariffs are supposed to only be introduced gradually and in a comparatively moderate manner. In addition, the designated US Treasury Secretary Scott Bessent made positive comments about the independence of the US Federal Reserve, which should strengthen investor confidence in the US markets. Bessent also comes from the hedge fund world and is therefore considered a real expert Financial markets.
With the agreement in the Middle East, at least one of the major trouble spots has now been defused. If the agreement is somewhat adhered to, oil prices are no longer expected to rise sharply. It remains unclear, however, whether and how the war in Ukraine can be ended as a second major trouble spot. If Trump prevails against Putin here, significantly falling energy prices are likely to further fuel the bull market. In contrast to his earlier “bragging sayings”, Trump himself no longer expects a quick solution.
Next week the reporting season will get off to a stronger start in the USA, and then also outside the financial sector. In Germany, producer prices and the ZEW index are published. Friday is the day of the purchasing manager indices, and with Givaudan, Ericsson and Blueberry the reporting season in Europe is picking up speed significantly. The Bank of Japan meets in Tokyo on Friday. And the week after next the European Central Bank (ECB) will meet. Also the anticipation of the expected next one Interest rate cut is already a fuel for the current bull market.
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DJG/hru/ros
(END) Dow Jones Newswires
January 17, 2025 04:34 ET (09:34 GMT)