FRANKFURT (dpa-AFX) - In a climate still marked by uncertainty, the DAX is expected to continue facing challenges in the coming week. The main question is whether Germany's blue-chip index can sustainably break through the 25,000-point threshold. At least from an economic perspective, the market barometer is unlikely to receive significant impetus from the United States or Europe until Friday. Additionally, with U.S. markets closed on Monday for Presidents' Day, the week is likely to start quietly in Germany as well.
Until mid-January, the DAX had managed to shrug off geopolitical risks, notching up one record high after another. Since then, however, investors have become more cautious, as some pillars of the recent rally have started to wobble. For instance, the boom in artificial intelligence is also producing potential losers within the sector. Investors also fear that the U.S. Federal Reserve may not cut interest rates as quickly as hoped this year, which would make equities somewhat less attractive compared to bonds.
"After the recent positive jobs report, the Fed's monetary policy is even harder to predict," wrote analyst Claudia Windt of Landesbank Hessen-Thüringen (Helaba). As a result, investors are likely to continue seeking a clearer picture of economic conditions in both the U.S. and Germany this week. All eyes are especially on Friday.
The week will close with the first estimate of U.S. gross domestic product growth for the final quarter of 2025, set for release in the afternoon. According to Windt, it currently appears that the latest, partially extended U.S. government shutdown has had less of an impact on the economy than feared.
On Friday morning, European and German purchasing managers' indices will also be published, serving as key leading indicators. "That's when we'll see whether investors' confidence is shaken or whether optimists in the stock market feel vindicated," said Ortay Gelen, an expert at independent asset manager Axia Asset Management.
From an investor perspective, the ideal scenario, according to the expert, would be for the purchasing managers' indices to rise moderately without signaling a boom. Too much optimism could prompt the European Central Bank to delay potential rate cuts, which would be negative for equities. Conversely, if the indicators are too weak, recession fears could mount, particularly hurting cyclical stocks.
Regardless, the ongoing Russian war against Ukraine, tensions in the Middle East, and the unpredictable policies of U.S. President Donald Trump remain key risk factors. Yet Sebastian Raedler, head of European equity strategy at Bank of America, currently sees opportunities in Germany. He notes that the federal government's fiscal stimulus package is finally making its mark in economic data, most notably in the latest figures on incoming orders for German industry.
With regard to the stock market, Raedler recommends overweighting German stocks in portfolios. They have lagged behind the broader European market since May of last year. Weighing the opportunities from the stimulus package against global economic risks, he sees a favorable risk-reward balance.
Meanwhile, a few laggards from the corporate earnings season are set to report this week. Thursday's agenda is particularly crowded, with aircraft manufacturer Airbus < NL0000235190A>, filling and packaging equipment maker Krones, and truck and train brake manufacturer Knorr-Bremse all scheduled to publish their annual results./la/jsl/he
--- By Lutz Alexander, dpa-AFX ---
