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In Europe, concerns about US tariffs, a struggling Eurozone economy and political uncertainty in France and Germany are continuing to hold back risk assets. France's CAC index is now nearly 6% lower on the year. The DAX forecast is also far from bullish, with a key drag being the European auto sector’s reaction to potential tariff threats.

This week’s US inflation data may impact Wall Street but will likely have limited implications for European indices. But one factor that is certainly weight on sentiment on this side of the pond is political uncertainty in Germany. Against this backdrop, our DAX forecast is turning bearish in the short term, especially if the German index now breaks a key support area that it was testing at the time of writing.

Hannover Rück is positioned for growth, with strong demand in reinsurance and an expected full-year net income target of €2.1 billion. The company’s strategic use of retrocession and insurance-linked securities (ILS) aids in expanding capacity. Continental shows improved profitability with a projected adjusted EBIT margin of 8.9%, despite a sales decline. Strong cost management and price adjustments helped drive earnings, particularly in the Automotive and Tires sectors.

The dismissal of Finance Minister Christian Lindner by Chancellor Olaf Scholz has led to the collapse of Germany’s ‘traffic light’ coalition, sparking political and economic uncertainty. Lindner’s FDP exit comes just two weeks before the critical 2025 budget vote, with key policy disagreements on climate and economic reform proving too divisive.

The German economy remains mired in a prolonged period of weakness that began in mid-2022, according to the latest Monthly Report from economists. Real GDP is expected to have contracted slightly in the third quarter of 2024.

The DAX was trading slightly lower, down for the third consecutive day, although it was only around 1.5% off from the recently achieved record high. Far from a turmoil, in other words. But equally, the loss of bullish momentum may be a sign that the markets could go in reverse soon.

Today’s German wholesale inflation data pointed to further ECB rate cuts in December, keeping the bullish DAX forecast intact – for now, anyway. However, ongoing weakness in the Eurozone economy, coupled with political uncertainty in the US – with the presidential election now only two weeks away – and not to mention the fact China’s markets don’t seem to be finding a sustainable recovery despite ongoing government stimulus efforts, all point to a potential dop in the coming weeks.

The monthly inflation rate in Germany remained unchanged in September 2024, with consumer prices showing no growth, consistent with preliminary estimates. This follows a 0.1% decline in August, indicating that price pressures continue to ease.

Markets were let down by China's absence of further stimulus measures overnight. After a briefing, the National Development and Reform Commission did not present any new plans, which caused stocks to decline throughout the region.

Fears regarding a decelerating US economy have been temporarily alleviated after Friday's payroll report that exceeded forecasts. The optimistic entiment spilled over into other regions. There are indications of a fresh consolidation until the end of the month, with a significant support level located between 19,000 and 18,830 points.

After reports of an Iranian rocket attack on Israel were confirmed in the afternoon, the DAX had to end the trading day with a discount of almost -0.8% at the day's low, after the US leading stock markets weakened. This led to a short-term deterioration in the DAX chart picture.