Dusseldorf. Hopes for diplomatic progress in the Iran war, falling energy prices and bond yields, as well as the outcome of the US midterms and a number of important company balance sheets: a number of factors are suddenly driving the German stock market towards a new record high.
In morning trading on Thursday, the DAX was up 0.6 percent at 26,600 points. The current record is within immediate reach at 26,618.74 points.
In the early fall, the German stock market traded mostly in a sideways range between 25,000 and 25,600 points for several weeks. He broke out of this for the first time last week. As a result, the DAX continued to work its way up.
In the past two trading weeks it has gained more than five percent or 1,400 points. This is a very rapid increase in a short period of time. Now it remains to be seen whether there are enough follow-up buyers at the high level or whether profits are being taken.
The price for a barrel of North Sea Brent (159 liters) was above the $115 mark by the end of October. This week it has fallen by around 20 percent at its peak. As of Thursday morning, the price is about $95 for delivery in January. WTI oil has also become significantly cheaper.
The situation is similar with gas. Last week, the TTF contract for gas in Europe, which is traded on the Amsterdam Stock Exchange, climbed above 100 euros per megawatt hour for the first time since the start of Russia's war of aggression on Ukraine in 2022. On Thursday the price for delivery in December is 85 euros.
The fall in energy prices is based on the hope that the Iran war will end soon. Diplomatic efforts have intensified. In the background, mediators who have emerged conduct various discussions. According to the Iranian Foreign Ministry, the US was promised that it would open the Strait of Hormuz within two days if Washington accepted Tehran's conditions.
The Democrats have won the majority in the US Senate and House of Representatives. This was previously considered the most likely scenario. US President Donald Trump has so far indicated that he will not challenge the results, which was met with relief on the markets. The most important indices in the USA have increased significantly in value.
The Republicans' defeat is closely linked to the sharp rise in the cost of living, largely caused by the Iran War. Experts point out that the pressure on Trump to present a timely solution is growing.
At the same time, the Democrats' victory could be accompanied by significantly stricter requirements for artificial intelligence (AI). Market observers believe it is possible that the rapid expansion of AI data centers could be slowed down.
AI stocks were therefore among the big losers in the middle of the week. The negative sentiment also spread to AI stocks on the Asian markets. The shift into more cyclical values benefits the Dax. Apart from the “Witches' Sabbath” in September and June, the trading volume on Wednesday was as high as it was last in May.
If oil and gas prices rise, this has a direct inflationary effect. The inflation rates in the euro area and the USA have far exceeded the central banks' target, and the European Central Bank (ECB) and the Fed have already responded with interest rate increases.
On the futures markets it is very likely that the central banks will raise interest rates again before the end of the year. However, the future prospects are uncertain. Many economists expect the ECB to remain silent as a result. The fall in energy prices strengthens this position.
This is accompanied by a decline in bond yields, which generally move in the same direction as interest rate expectations. The interest rate on ten-year German federal bonds was 3.27 percent on Thursday. This is the lowest level since the end of August. In September the yield rose to 3.65 percent.
In France, the yield on ten-year bonds is 4.76 percent. Here, interest rates rose above five percent in October for the first time since 2002, which led to great uncertainty on the markets. As a result, the yield gap with Germany, the so-called “spread”, has also narrowed again. As yields rose, it reached its highest level since the euro crisis.
It's similar in the USA. The trend-setting ten-year yield there fell from 5.37 percent to 4.87 percent. Falling bond yields tend to be good for stocks because safe government bonds offer less attractive returns compared to stocks and at the same time borrowing costs for companies fall.
