DAX Takes a Breather After Sharp Rally
On Thursday, investors in the DAX adopted a more cautious approach following Wednesday's massive surge. The index managed to finish the Xetra session with a gain of 1.2%, closing at 24,856.12 points. The primary driver was a significant opening gap, triggered by US President Donald Trump’s decision to walk back his earlier threats of punitive tariffs against Europe.
The Greenland Deal: Lingering Uncertainties
Despite the market's relief, the situation remains tense. While a framework for a deal regarding Greenland appears to have been reached in Davos, few specific details have been made public. Furthermore, a slight "rumbling" from Washington is once again audible. Reports from circles close to the US President suggest that "harsh countermeasures" could be taken if European countries begin selling off US Treasury bonds in response to geopolitical pressures. In short, the deal still seems to harbor several unresolved ambiguities that could spark future volatility.
Geopolitical Hope: Peace Talks on the Horizon?
On a more positive note, encouraging geopolitical news is trickling in regarding the conflict between Ukraine and Russia. Reports suggest that a trilateral meeting between the warring parties and the US is imminent, potentially taking place as early as this weekend. President Zelenskyy hinted in Davos that a peace deal is nearly finalized, raising hopes that a significant diplomatic breakthrough could soon be achieved. Such a move toward peace would be a major catalyst for European equity markets.
Fundamental Outlook: PMI Data to Drive the Weekend
The DAX heads into the weekend facing a barrage of fundamental data in the form of Purchasing Managers' Indices (PMI). At 9:30 AM, shortly after the market opens, Germany’s figures will be reported, followed by the Eurozone data at 10:00 AM.
Additional momentum will likely come from the US at 3:15 PM (CET) with the release of their own PMI reports. Given that the DAX often follows the lead of US markets, these figures could significantly influence the final hours of trading. Analysts will be watching closely to see if the recent recovery in sentiment is backed by actual industrial output and service sector growth.
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