Investors on the German stock market are bracing for more losses as the DAX continues to correct following its record rally. Recent estimates indicate the index could drop by approximately 0.7 percent, anticipating significant changes from Friday's trading, which saw it peak at 21,520 points before settling slightly lower at 21,395 points.
The rally appears to have hit its peak, prompting experts to assess the situation closely. Technical analyst Christoph Geyer stated, "the overdue correction" for the DAX is imminent, highlighting the support level around 20,500 points as the next potential anchor for investors. This raises the pressing question: has the DAX's short squeeze finally concluded?
Market rumors suggest many players had built substantial short positions recently. The continuous increase in prices forced short-sellers to close their positions to prevent mounting losses, pushing prices even higher during the early days of the year—a climb of over eight percent since the start.
Further complications stem from external pressures, particularly from Wall Street. Speculation surrounding the new U.S. president's impending tariff announcements has unsettled American investors, as indicated by the declines on major indexes last Friday. The Dow Jones Industrial Average fell by 0.3 percent, the Nasdaq dropped 0.5 percent, and the S&P 500 slipped by 0.3 percent.
Asian markets reflected similar uncertainty at the opening of the trading week, with no clear direction. The Nikkei index experienced a dip of 1.1 percent, triggered largely by pressure on technology stocks. Conversely, expectations for government support measures rose following China's Purchasing Managers' Index, which indicated unexpected contraction within the industrial sector.
On the other side of the equation, the Euro has seen minor fluctuations against the dollar, dropping 0.1 percent to $1.0463. Meanwhile, gold prices shifted downward to $2,753 per ounce, reflecting broader market aversions.
Oil prices remain under pressure as President Trump has reiterated calls for OPEC to cut prices, impacting crude oil values. Brent crude increased by 0.6 percent to $78.01 per barrel, whereas U.S. WTI oil saw a drop of 0.7 percent, trading at $74.17.
The risk-averse nature of investors is also visible within the cryptocurrency market, where Bitcoin has recently fallen below the psychologically significant $100,000 level, losing momentum following Trump's prior enthusiasm for cryptocurrency.
Specific companies are also under scrutiny. BASF has faced setbacks, with write-offs and restructuring costs significantly impacting its performance; preliminary results indicate operating income (EBIT) declining from 2.2 billion euros to 2.0 billion euros, far below analysts' expectations of 3.2 billion euros.
Vonovia, Germany's largest residential real estate company, progressed with plans to solidify its control over Deutsche Wohnen, gaining overwhelming support from shareholders at a recent extraordinary general meeting.
Despite the downturn, the ifo Business Climate Index recently surprised analysts by increasing from 84.7 to 85.1, hinting at improving sentiment among business leaders within the German economy.
This week promises to be pivotal as market participants shift their focus to the policy decisions from significant financial institutions like the Federal Reserve and the European Central Bank. Expectations are set against the backdrop of Trump's influence on interest rate policies and anticipated moves by the ECB.
Overall, analysts agree—a major correction was long overdue across both the DAX and U.S. indices after weeks of aggressive upward movement. The current atmosphere reveals investors must remain vigilant as the markets recalibrate, adjusting to the new economic realities and global narrative surrounding tariffs, central bank responses, and technological market pressures.