DAX Record Fever: Why "Bad News" is Currently Fueling the Rally
The triumphal march of the German leading index remains unstoppable. On Thursday, the DAX continued its climb, largely unimpressed by brief intraday dips. While it momentarily looked as though significant profit-taking might stall the index, a fresh tailwind from the US afternoon session ensured the opposite: the record-breaking run continued at full throttle.
Market Paradox: Weak US Data as a Price Driver
Two key factors supported investor optimism yesterday. First, industrial orders in Germany surprised on the upside, strengthening fundamental confidence in the domestic economy. Second, the USA provided a classic market paradox: initial jobless claims were higher than expected. In a normal environment, this would be a warning sign; currently, it serves as a perfect setup for equity markets.
The logic among investors is clear: weakening labor market data increases the pressure on the Federal Reserve to cut interest rates sooner to support the economy. Lower rates mean cheaper financing costs for corporations—a direct impulse for future investments and earnings.
Euphoria vs. Caution: When Will the Rally Run Out of Steam?
Despite the glittering facade, investors should not entirely ignore the warning lights. While the index shows no immediate signs of weakness, every vertical rally eventually reaches an end. The current mantra among many professionals is: "Too early to sell, but perhaps a bit late for a massive new entry." Cautious positioning, particularly with an eye on stop-loss levels, is advisable in this overbought market environment.
Afternoon Showdown: Non-Farm Payrolls (NFP) in Focus
Today, Friday, could see a massive spike in volatility. Alongside data on European industrial production, the highlight of the week arrives at 2:30 PM CET: the release of the US employment report (Non-Farm Payrolls). The same logic applies here: if fewer jobs were created than forecasted, it could solidify hopes for rate cuts and catapult the DAX to yet another all-time high.
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