FRANKFURT (dpa-AFX) - The bumpy recovery of the German equity market could extend into the coming week. Investors continue to hope that the fragile ceasefire in the Middle East conflict holds and that the Strait of Hormuz, a critical artery for energy trade, will eventually be reopened.
However, DZ Bank analyst Christian Reicherter noted that history suggests setbacks in any potential rapprochement process must be factored in. Consequently, the prevailing optimism among market participants appears to have overshot somewhat recently.
In this context, news regarding the military confrontation between the US and Israel on one side and Iran on the other is expected to continue driving market direction. Investors are particularly focused on the implications for the crude oil market. Should the price of a barrel of Brent North Sea crude remain sustained above the closely watched 100 dollar mark, it would pose a significant inflationary threat. This, in turn, could force central banks to consider raising key interest rates, which would subsequently weigh on equity markets.
Against this backdrop, investors in the coming week will likely focus primarily on US price data due on Tuesday. Robert Greil, Chief Strategist at private bank Merck Finck, noted that President Donald Trump needs lower inflation rates as soon as possible to have a realistic chance of defending the Republican majority in Congress during the November midterms and avoiding 'lame duck' status. However, the current trend points elsewhere: 'US inflation figures for April are likely to approach the four percent mark rather than three percent.'
Greil also sees further reasons why Trump should be interested in a swift end to the war. Market pressure to reach an agreement is generally mounting. Furthermore, there are ammunition shortages, and the war is draining funds needed for domestic priorities.
The market statistics experts at Index Radar are not overly pessimistic about the near future. While high oil prices, geopolitical tensions, rising inflation expectations, and a Federal Reserve maintaining maximum flexibility do not typically create an environment for record highs in indices like the Dax, liquidity, technology-driven sentiment, and robust corporate earnings continue to act as a remarkably resilient counterweight.
Analyst Claudia Windt of Landesbank Hessen-Thüringen also expressed cautious confidence: 'So far, investors are merely exercising restraint; a return to crisis mode has not yet been observed, especially as US President Trump reaffirmed a continuation of negotiations with Iran.' As it stands, war-related fluctuations between risk-on and risk-off sentiment are expected to persist until a peace agreement takes effect.
Beyond geopolitics, investors must digest a heavy slate of corporate earnings in the coming week. On Monday, reports are expected from engineering group Gea Group, reinsurer Hannover Re, and construction firm Hochtief regarding their first-quarter performance. Tuesday will see results from Dax heavyweights Bayer, Munich Re, and Siemens Energy, alongside numerous small- and mid-cap companies.
The agenda is even more crowded on Wednesday, with Allianz, Brenntag, Deutsche Telekom, Eon, Merck KGaA, Porsche Automobil Holding, RWE, and Siemens all scheduled to report from the benchmark index alone./la/ajx/he
--- By Lutz Alexander, dpa-AFX ---
