After a lethargic start to the week, losses were seen on the German stock market on Tuesday. The tense situation in the Middle East is depressing investors’ willingness to take risks.
At the start of the session, the DAX fell 1.24 percent to 24,048.25 points. This brought the psychologically important 24,000 hurdle back into focus in the morning. As the market progresses, however, the stock market barometer moves back slightly from the daily low, even if the bears continue to dominate the picture.
Ceasefire continues to wobble – peace negotiations stalled
The war concerns surrounding Iran continue to haunt investors on Tuesday, especially against the backdrop of continued rising oil prices.
The US government is further increasing the economic pressure on Iran. It imposed sanctions on several individuals and companies. In addition, according to US President Donald Trump, the ceasefire with Iran, which has lasted for almost five weeks, is only hanging by a thread. The reason for this was the “stupid proposal” from Tehran to end the war, he said in Washington. “She’s the weakest she’s ever been after reading this crap.”
“There is still no progress between the USA and Iran. The situation seems deadlocked,” wrote Thomas Altmann from asset manager QC Partners. The hanging game could continue for some time. “It is still too early for any form of all-clear. This issue will accompany the stock markets and the global economy for a long time to come.”
Investors are concerned about inflation
The developments in the Middle East conflict continue to determine the direction of the stock market. Investors pay particular attention to the impact on the crude oil market. If the price for a barrel (159 liters) of the North Sea Brent variety is permanently above the much-noticed mark of 100 US dollars, there is a risk of a significant increase in inflation. This in turn could force central banks to raise key interest rates and put pressure on the stock markets.
Against this background, investors will probably also look at the US price data expected today. President Donald Trump needs lower inflation rates as soon as possible in order to have a realistic chance of defending the Republican majority in the congressional chambers in the midterm elections in November and not become a “lame duck,” wrote Robert Greil, chief strategist at private bank Merck Finck. But the trend so far is completely different: “The US inflation figures for April are likely to approach the four percent mark rather than the three percent mark.”
Analysts with cautious confidence
Greil sees other reasons why Trump might be interested in an early end to the war. The pressure on the market to reach an agreement is generally increasing. There are also ammunition shortages and, because of the war, there is a lack of money for domestic tasks.
The stock market statistics experts at Index Radar are also not too pessimistic about the near future. High oil prices, geopolitical tensions, rising inflation expectations and a US Federal Reserve that allows maximum flexibility do not result in an environment that is normally known for record highs in stock indices such as the DAX. But liquidity, technological imagination and robust corporate profits continued to act as a resilient counterweight.
Analyst Claudia Windt from Landesbank Hessen-Thüringen was also quite confident: “So far, investors have only exercised restraint; a return to crisis mode has not yet been observed, especially since US President Trump confirmed that negotiations with Iran would continue.” As of today, the war-related fluctuations between risk-on and risk-off would continue until a peace agreement comes into force.
The end of the reporting season remains in focus
Otherwise, investors will also have to process a wealth of other company figures in the new week. There are numerous balance sheet templates on the agenda for this week in both the DAX and the small cap indices.
DAX record last in January
The gap to record levels remains on the German stock market. On January 13th, the DAX reached an all-time high of 25,507.79 points. Ultimately, it ended trading that day at 25,420.66 points, which also set a record based on the closing price.
Benedict Kurschat, Alexandra Hesse, finanzen.net editorial team with material from dpa-AFX and Dow Jones Newswires