Uncertainty lingers despite initial profits reported by Dax
The DAX index, Germany's benchmark stock market index, is experiencing a complex mix of cautious optimism and persistent risks following the recent US-EU trade agreement, according to market experts.
Jochen Stanzl, chief market analyst at CMC Markets, stated that the agreement has significantly affected investor optimism. The DAX started trading on Tuesday with a gain of 0.6 percent, but it has since taken a turn, putting a significant dent in investor optimism.
Key players like BASF, Vonovia, and Volkswagen were among the losers in the Dax, while Siemens Energy, Infineon, and Siemens Healthineers led the winners' list.
Stanzl notes that the agreement imposes 15-50% tariffs on German exports, especially hurting the automotive, steel, and pharmaceutical sectors, risking up to 70,000 jobs. However, the deal notably avoids more severe tariff rates and offers a floor for future negotiations, providing some relief.
The DAX index is at a critical juncture near the 24,000-point level, which historically acts as support and resistance. Despite the recent recovery in 2025, supported by fiscal stimulus and strong energy sector gains, banking underperformance and recession fears temper enthusiasm.
Stanzl indicates that the 23,900 points are the straw that investors are clinging to for now, and it could get uncomfortable if this straw breaks. Important support at 23,900 points was defended in the Dax, despite most trading being in sell mode the previous day.
Market sentiment has shifted from uncertainty to cautious optimism due to the trade truce. However, experts warn of continued volatility and macroeconomic risks, including inflation and ongoing global trade negotiations.
German economic sentiment has recently tumbled, reflecting disappointment that the agreement did not produce a stronger outcome for the German economy. Analysts note that the EU was in a weak bargaining position, unwilling to accept short-term economic pain to secure better terms.
Despite the negative news, the Dax has risen in recent weeks, but this trend seems to have been interrupted. The trade agreement with the USA has caused uncertainty, which could lead to further price movements in the Dax.
Stanzl warns that if the Dax consistently falls below the 23,900 points mark, the risk of a real selling wave increases. However, he also notes that there is still buying interest at the 23,900 points level, or at least selling restraint, providing some hope for the current day.
Overall, the DAX index remains broadly steady, with investors balancing exposure between challenged sectors (auto, banking) and beneficiaries (energy, industrials). Market experts suggest strategies such as sectoral diversification, cautious phased investment, and structured products to manage expected volatility in the near term.
In summary, the US-EU trade agreement is creating a mixed sentiment shift for the DAX: a relief rally supported by tariff moderation paired with underlying concerns about long-term trade frictions and economic stagnation risks. This is likely to result in sideways to cautiously bullish price movements with episodic volatility as investor attention focuses on upcoming macroeconomic data and trade developments. The Dax is currently dancing on a knife's edge, with the 23,900 points level acting as a key support.
The recent US-EU trade agreement has significantly altered the finance sector, impacting large German businesses in the automotive, steel, and pharmaceutical industries, potentially putting up to 70,000 jobs at risk. This agreement has affected the overall business environment and has caused a mix of cautious optimism and persistent risks for the DAX index.
Despite the current recovery, the banking sector's underperformance and recession fears have tempered investor optimism, making the DAX index remain broadly steady as market experts suggest strategies to manage the expected volatility in the near term.
