A significant breakthrough has energized global markets: The EU and the US have reached an agreement in their tariff dispute, announced recently. A 15 percent tariff rate was agreed upon—half of the initially threatened 30 percent. Markets reacted positively, with both the euro and equity indices surging. The DAX now has a clear path to potentially hit a new all-time high this week.
However, caution is warranted. Reports from institutions like Goldman Sachs indicate speculative trading is reaching extremes, with private speculators increasingly betting against tech stocks. The widely watched Fear & Greed Index stands at 75 out of 100 possible points, firmly pointing towards "extreme greed"—a classic warning sign of an overheated market. It remains to be seen how strong the market's reaction will be after the initial open. While the relief over the agreement is substantial, the imposed tariffs will still impact the economy and price development. Thus, a brief period of euphoria could quickly give way to significant profit-taking, potentially pushing the market southward again.
Volkswagen and Porsche Recovering – MTU Faces Recall Headwinds
Among individual stocks, Volkswagen and Porsche recently showed signs of recovery. After processing the shock of weaker results, Volkswagen's management adopted a combative stance, and the stock gained 4.6 percent, with Porsche rising 3.7 percent. While Porsche continues to struggle with finding a clear bottom, Volkswagen has already moved a step further, aiming to reclaim the €100 mark. MTU Aero Engines, however, found itself at the bottom of the list, still grappling with the fallout from a recall. The stock is currently at a key support level, seeking direction on whether the selling pressure can be halted.
Federal Reserve's Next Move: A Decisive Factor for the DAX?
For the upcoming trading week, how investors interpret the tariff agreement will be crucial. Following what could be a strong start to the week, it will be vital to see if fresh capital enters the market to sustain the upward trend. A key indicator to watch will be the Federal Reserve's upcoming decision. Will the Fed commit to an interest rate cut, providing further impetus to the market?
Will the DAX continue its ascent to new records, or does a post-deal correction loom?
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