DAX trends firmer toward record high – geopolitical risks lose their scare factor

Background: Geopolitics loses its scare factor

Timo Emden, market observer at CapTrader, put the sentiment in context in a statement. The original wording reads: „Geopolitische Drohgebärden sorgen zwar weiterhin für Schlagzeilen, entfalten an den Märkten längst nicht mehr die toxische Dosis wie vor wenigen Monaten." With this, Emden underscores that investors' sensitivity to foreign-policy risks has eased over recent weeks.

A look at the Asian leading stock exchanges shows a mixed picture. While some indices in the Asia region managed to gain slightly, the exchange in Shanghai shed 0.2 percent. The moderate weakness in Shanghai is seen by traders as a counterpoint to the friendly tendency in Europe, but it had no major broader impact.

Individual stocks in focus: OHB, Infineon and SIG Group

Among individual stocks, OHB, Infineon and the SIG Group have recently moved into the focus of investors. These titles were mentioned with striking frequency in the research reports and market reports of the financial agency dpa-AFX in recent trading days. Industry observers interpret this as an indication of persistently high interest, particularly in technology and industrial stocks from the MDAX and SDAX environment.

The US President and the US government once again appeared on Monday with sharp rhetoric directed at Iran. Concrete military moves, however, did not materialize. According to several observers, the sheer frequency of sabre-rattling in recent months has led investors to increasingly price in such statements as background noise.

Strait of Hormuz as a latent risk factor

The Strait of Hormuz, one of the most important sea routes for global oil trade, was symbolically at the center of the reporting. Should there actually be a military escalation in the region, the consequences for energy prices – and thus also for European equity markets – would be clearly felt. Currently, however, most market participants assess this risk as limited.

On the bond market, yields on German government bonds were broadly stable. The euro traded against the US dollar in a narrow range. Both factors, in the view of observers, underpin the already robust underlying mood in European equity markets.

Outlook: US data and economy in focus

In the afternoon, US economic data and the reporting season of individual US corporations are likely to provide fresh impetus. If the upcoming data meet analysts' expectations, some market observers see further upside potential for the DAX. Risks are seen primarily in an abrupt shift in sentiment, for example through a surprise interest-rate decision or a new escalation in the Middle East.

Overall, the picture remains friendly: The German leading index is trading near its record high, investors are hardly unsettled by geopolitical headlines anymore, and the lead indicators from Asia provide no clear negative signals. Market observers like Emden therefore expect a positive, if not overheated, trading session.