Market report: DAX recovery continues

At the start of the week, the DAX maintains its slightly higher level from Friday and remains above the 25,000 point mark. At the start of trading, the leading German index gained around 0.4 percent and then expanded its gains slightly. The early index high so far is 25,268 points.

This builds on the recent interim recovery. At the end of the week it had already risen around 1.1 percent to 25,087 points after a turbulent week of trading. Tailwind also comes from good guidelines from Wall Street. The major US stock indices all rose on Friday.

The good mood is supported by a slight decline in oil prices following the EU's recent trade agreement with China on export restrictions for hybrid cars. Auto stocks also benefit from this.

In addition, the prospect of Russian diesel deliveries to the USA “takes some pressure off the international energy markets,” said Andreas Lipkow, chief analyst at broker CMC Markets. US President Donald Trump said he agreed on extensive diesel deliveries with Russian President Vladimir Putin on Friday, which sparked strong criticism in Europe and also from US politicians.

However, the development is politically explosive because it could also shift the balance of power in the Ukraine war, said Lipkow. The situation in the Middle East also remains tense: Yemen's Houthi rebels have expanded their attacks on Saudi Arabia.

Interest rates and oil continue to determine the direction

Overall, developments on the bond and oil markets will continue to influence the mood on the German stock market in the new week, meaning that the recovery is on shaky ground. “The two central stressors, oil prices and bond yields, are grating on nerves and have led to discounts for stocks and gold, while yields in both the euro area and the USA remain near their highs,” said Claudia Windt from Landesbank Helaba, summing up the fluctuations on the markets.

Meanwhile, the situation on the bond markets remains delicate, especially since, according to Windt, “there is no short-term solution to the budget deficits that are spiraling out of control.” This affects both the USA and France. "As long as monetary policy has to tighten interest rates due to high oil prices, interest costs will continue to rise and thus put a strain on national budgets."

With the start of the US reporting season, a third stimulus for the direction of the DAX will come into play from Tuesday. The US reporting season, which traditionally starts earlier than in Europe, begins with the banks' results.

Investors will closely examine the financial institutions' reports and, above all, their outlook, as indications of changes in the market environment are usually reflected in the banks' books at an early stage. "Banks are a good indicator of how loan demand is developing and what the general economic situation is," said Kim Forrest, chief investor at Bokeh Capital Partners.

“This also gives us insight into what the Federal Reserve (Fed) might do,” said Forrest. And on top of that, inflation data in the United States for September could potentially impact the Federal Reserve's interest rate plans.

Meanwhile, Volkswagen's sales decline continued to accelerate in the third quarter. Around 1.89 million vehicles from all Group brands were delivered to customers worldwide from July to September - 14.3 percent less than a year earlier, as the company announced in Wolfsburg this morning. At 38.5 percent, the decline was particularly high in China. VW sold a good six million cars from January to September. That is 9.0 percent or around 600,000 fewer than in the same period last year.

The VW commercial vehicle holding Traton, on the other hand, noticeably increased its sales in the third quarter. Sales rose by ten percent to 78,900 vehicles, as the MDAX group announced today in Munich. The main reason was a better performance in the US market, which had collapsed significantly a year ago due to President Donald Trump's tariff caper.