DAX Hits Record High After Weak US Labor Market Data – Hopes for Rate Easing Grow

Goldilocks Scenario Buoys Prices

Mark Vitner, chief economist at Piedmont Crescent Capital, added: „Dies verliehe Aktien weiter Auftrieb, ohne Ängste vor einer Konjunkturabkühlung zu schüren." Salah-Eddine Bouhmidi, market observer at broker IG, also expects fresh momentum: „Vielmehr dürfte der Markt nun verstärkt auf eine geldpolitische Lockerung im vierten Quartal nach den US-Zwischenwahlen setzen". With the weaker US labor market, expectations of interest rate hikes in the US were scaled back somewhat on Thursday.

The background to the record rally also includes the economic situation in Asia. In China, foreign demand for services rose to its highest level in 20 months, even though the sector as a whole grew somewhat more slowly. In Japan, the purchasing managers' index for the services sector signaled growth once again in June. The Nikkei in Tokyo turned positive after initial losses and was last up 0.7 percent at 69,243 points. The broader Topix gained 0.9 percent to 4,051 points. The MSCI index for Asia-Pacific equities outside Japan rose by 1.3 percent.

Asian Markets Move in Tandem

In South Korea, the KOSPI index gained 3 percent. In the morning, it clearly turned positive after further losses at the start. The KOSPI in Seoul had more than doubled over the course of the year, but most recently the index had corrected by 15 percent. Sentiment in Asian markets thus followed the positive signal from the US, even though US stock exchanges remained closed on Friday for Independence Day.

Berlin Plans 2027 Budget and Reforms

Meanwhile, a political course change in Germany is providing plenty to talk about: the federal cabinet intends to adopt the draft for the 2027 budget on Monday. Federal Chancellor Merz stressed that public debt must be kept under control, noting that room for maneuver is limited. Following the agreements on the health insurance savings package, on pension reform, and on the reform package regarding taxes, labor, and deregulation, the Union and SPD want to lead Germany out of the economic crisis. Starting in 2027, low and middle incomes are to be given tax relief.

US Corporations Dominate the Ranking

A current EY analysis also highlights the dominance of the US among the world's most valuable companies: eight of the ten largest corporations come from the United States. At the top is chipmaker Nvidia with a market capitalization of $4.8 trillion, followed by Google parent Alphabet, Apple, and Microsoft. From Germany, only Siemens is represented in the top 100 – at rank 72 with a market value of just under $250 billion.

The combination of record-high DAX levels, friendly Asian markets, and hopes for monetary easing in the US is providing tailwind for trading overall. Observers, however, also see risks: should the US Federal Reserve stick to its tightening line despite the weaker job data, the rally could quickly lose steam. Until then, however, investors remain focused, in the words of Bouhmidi, on a fourth quarter with falling interest rates.