GER40

The German DAX record high is back in reach after four straight higher sessions, helped by cheaper energy and resilient eurozone data.

But the question, of course, is how much further oil prices and bond yields can fall. For now, the combination is supportive of risk assets and is helping to sustain a relatively benign decline in the dollar. The focus today will be on US core PCE inflation, due for release shortly, while Nvidia’s second-quarter earnings will provide another test for risk appetite after the US markets close – not just for US indices but for global tech-heavy indices given the influence Nvidia has over the global tech and AI names.

If oil prices continue to rise, this could weigh on European markets which have been quite resilient of late. That could weigh on the German DAX forecast given the nation’s reliance on energy imports.

Different economies, different drivers, similar price action. The German DAX, ASX 200 and Russell 2000 are all hinting at a more optimistic view on the global economy.

Markets are taking Trump’s latest declaration with a degree of caution. His claim that “we ended the war with Iran” triggered an immediate risk-on reaction, pushing oil prices sharply lower and lifting equities.

European equities pushed higher this morning, joining the global rally. Investors are balancing ongoing geopolitical uncertainty in the Middle East against the relentless strength of the global technology sector. While European benchmarks have lagged behind Wall Street’s technology-led advance for much of the year, it appears like other areas of the market are catching up a little as risk appetite returns.

Following yesterday's rally, European markets were trading a bit on the soft side this morning as weak-to-mixed earnings and uncertainty about the US-Iran situation discouraged excessive risk-taking. Still, the sentiment surrounding a potential US-Iran agreement remained largely positive, and this helped to keep pressure on oil prices for the third day.

The markets should not ignore the economic impact of the closer of Strait of Hormuz, and failed peace talks at the weekend. Energy prices are going to remain elevated the longer this drags on, and this is particular bad news for European markets reliant on energy imports.

As we head towards the European close, it is a good sign to see markets holding onto their gains despite some reports of violation of the ceasefire with Israel continuing to bombard Lebanon which, in turn, has trigged Iran to stop the passage of oil tankers via Hormuz strait according to some reports.

Markets remain firmly at the mercy of geopolitical headlines, and Trump’s constant social posts delivering mixed messages. The US dollar, stock indices, gold and crude oil are all continuing to swing on every update tied to the Middle East conflict. Traders are hanging on any signals around whether ceasefire talks are even remotely on the table. Until there’s something concrete, it’s hard to see risk appetite improving in any meaningful way.

European markets have started to push higher again, taking their cue from Asia. The Nikkei 225 surged to a fresh record high overnight, with exporters benefiting from recent yen weakness after reports that Japanese PM Takaichi had expressed reservations to BoJ Governor Ueda about further rate hikes. The likes of Germany’s DAX were higher, although the FTSE 100 again stole the show, hitting fresh highs, as it closed in on 10,800. The UK benchmark is now up for the 5th consecutive week, boosted by HSBC earnings and as miners (e.g., Fresnillo) continue good form on metals gains.

Global markets were mixed in the first half of Thursday’s session, but overall sentiment remained fairly constructive. US index futures edged higher after forecast-beating earnings from Meta helped offset weakness in Microsoft, keeping Nasdaq 100 futures hovering near record territory. In contrast, Germany’s DAX came under pressure after a sharp sell-off in SAP, which knocked more than 1% off the index.