FRANKFURT (dpa-AFX) - Following its recent weakness, the Dax could continue to struggle in the coming week amid a persistently tense geopolitical environment. After the peak of the current reporting season, which according to Claudia Windt of Landesbank Helaba supported equity prices with solid corporate results, the flow of corporate news is now set to thin out significantly.
Measured against inflation concerns and the lack of progress in Middle East negotiations, stock markets have fared relatively well so far, Windt emphasized. She pointed to record highs for major indices in the US and Japan. However, the development of the German benchmark index appears more subdued. The coming weeks will also reveal 'how severe the real economic disruptions resulting from the energy price and inflation shock will be, potentially dragging equities down with them'. This is already more evident in the bond market, where yields have risen sharply.
Equity markets continue to attempt to move past the Middle East conflict as a source of volatility, according to the outlook from DZ Bank. Yet, despite the recovery since the outbreak of hostilities, the Dax and its eurozone counterpart, the EuroStoxx 50, are still trading well below their previous levels. In contrast, the record-breaking run in New York, fueled by Artificial Intelligence (AI), suggests that the Iran issue no longer plays a major role there. Such divergence is also evidenced by the differing trends in volatility indices based on the Dax and the broad-market US S&P 500 index.
Ahead of the weekend, profit-taking occurred globally in the technology and particularly the semiconductor sectors, despite another round of encouraging US corporate results. However, observers expect the AI-driven rally to resume after a pause. US markets, with their tech giants such as AI chip specialist Nvidia, Google parent Alphabet, and software group Microsoft, would benefit disproportionately more than European markets, where the tech industry does not hold nearly the same level of importance.
In the coming week, Nvidia will traditionally be the last of the 'Magnificent 7' to release its quarterly report on Wednesday after the US market close. Expectations are high as always, with the shares in rally mode at record levels. RBC Capital Markets expects the AI chip specialist to raise its guidance for the current quarter.
The outlook for the German stock market, however, appears somewhat bleaker. Market analyst Timo Emden noted an 'increasing sense of a hangover' here. High expectations for the meeting between US President Donald Trump and his Chinese counterpart Xi Jinping initially supported prices. 'After the summit, however, disappointment prevails over the lack of concrete progress in resolving the Iran conflict.'
The corporate agenda for the new week looks light. On Monday, Irish low-cost carrier Ryanair will report on its performance for the past fiscal year. The following day, exchange operator Euronext and DIY chain Hornbach will present their figures. Reports are scheduled for Thursday from Italian insurer Generali and British airline Easyjet, among others. Additionally, Südzucker will publish its full annual report.
Otherwise, a series of important leading economic indicators are due, noted Robert Greil, Chief Strategist at private bank Merck Finck. As long as the Strait of Hormuz, crucial for global trade, is not sustainably reopened, these are likely to remain in a downward trend. Greil expects a further deterioration in the Purchasing Managers' Indices (PMI) to be released on Thursday. He fears the same for the German Ifo Business Climate index on Friday, which is expected to have fallen for the third consecutive month in May./gl/ajx/he
--- By Gerold Löhle, dpa-AFX ---
