July 4th, Independence Day in the USA, meant no trading on American exchanges. This had a negative impact on the DAX on Friday, as the absence of optimistic US investors in the afternoon led to a nervous market sentiment. The trading day closed with a decline of 0.61 percent, and the DAX ended Friday at 23,787.45 points. For some market participants, this was a disappointing outcome, as the initial situation was actually promising. An agreement in the trade dispute seemed close, and President Donald Trump had passed and signed his "Tax and Spending Bill." While there are always proponents and critics of this legislation, it was largely seen as a positive signal for the economy. It remains to be seen how the US markets will react on Monday after the holiday.
Ukraine Escalation: An Underestimated Factor for the DAX?
Another factor often overlooked in the headlines is the ongoing escalation of the war in Ukraine. Although the situation has unfortunately almost become normal, investors and traders seem no longer to consider it in their investment decisions – or do they? This possibility does exist, as attributing Friday's setback solely to tariff fears seems too simplistic upon closer inspection. This situation is not new and should already be fully priced into stock values. Donald Trump is not aiming to destroy trade but to optimize it in the interest of the USA. The German economy needs the USA, and the USA needs the German economy. For this reason alone, concrete solutions will emerge sooner or later.
The DAX's Trajectory: Uncertain Outlook
Rheinmetall was one of the biggest beneficiaries in the DAX on Friday, leading the DAX values with an increase of 3.3 percent. Siemens AG's shares, on the other hand, were at the bottom of the DAX with a decline of 2.6 percent.
The coming week will have to show how the DAX and its investors will position themselves in the current situation. From a technical analysis perspective, investors must make a decision, as the current situation is rarely so ambiguous. There are actually few reasons for a significant decline, but precisely this might be why no one expects the DAX to enter an extensive correction.
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