Weekly outlook: “The stock markets have run out of steam”

The conflict between Israel and Iran is fueling uncertainty. Oil prices are climbing, stock markets are sliding. Central banks are unlikely to be able to do much to alleviate the growing skepticism this week.

16 June, 2025. FRANKFURT (Börse Frankfurt). Recent geopolitical tensions have shifted the focus on the stock markets. “Events in the Middle East will take center stage in the coming days, with investors focusing their attention on a possible further escalation between Israel and Iran,” writes Deutsche Bank. Last week, the price of oil (Brent Crude Oil: +12 percent) rose significantly, while the stock markets were dominated by negative figures.

The DAX lost 3.2 percent over the week, while the Stoxx Europe 600 lost 1.6 percent. Nevertheless, gains of 18 and 7 percent respectively have been recorded since the beginning of the year. On Monday morning, the DAX stood at 23,410 points after closing at 23,516 points on Friday. The major US indices, the S&P 500 (-1.1 percent) and Nasdaq 100 (-1.3 percent), closed lower on Friday, postponing their assault on new record highs. In the Middle East, Israel and Iran launched renewed attacks against each other over the weekend. In addition, the resumption of talks between the US and Iran on a nuclear agreement, scheduled for Sunday, was canceled.

Too much optimism and too high valuations

Many market participants assume that the correction that has begun on the stock markets will continue. “With the return of geopolitical risks, investors seem to be preparing for further setbacks. These are likely to provide an opportunity to rethink the recent overly optimistic trade policy expectations,” notes Helaba's research team, which was already relatively cautious. The stock markets have “simply run out of steam.” Thorsten Weinelt of Commerzbank also expects a breather after the significant price gains in April and May. “Geopolitical risks in the Middle East and slow progress in negotiations on US import tariffs are likely to slow down the now quite highly valued stock markets for the time being.”

The DAX lacks “inner strength”

Berndt Fernow of LBBW fears that the military conflict between Israel and Iran could last longer this time because the protective powers of the US and Russia or China would leave it at warnings. “For the stock markets, this development could trigger the consolidation we have been expecting for some time.” He sees the DAX's lack of inner strength as particularly problematic. By this, the analyst means that prices have hardly been able to advance during actual trading hours recently. This means that the effective willingness to buy shares at the current price level has declined significantly. “The buyer side is losing strength compared to the seller side.” In addition, market breadth continues to leave much to be desired. “In the DAX, only 13 stocks have outperformed the index this year, while 27 have underperformed.”

The DAX from a technical analysis perspective

Despite the recent price setbacks, the upward trends remain intact according to technical analysis. “Nothing has happened yet with the DAX,” explains Marcel Mußler from Mußler Briefen. In his view, the interim high of 23,476 points in March plays a decisive role. The technical analyst describes this mark as “major support.” He sees the next potential support level at 22,861 points. However, risk-taking investors could already be lying in wait there. Because: “The classic scenario suggests that a new attempt to reach the top will start from there.” For a “secure long setup,” however, the DAX would have to find its way back above the pullback to the flattened upward trend at 23,800-23,930. “Only then will a relief rally provide a binding signal that the DAX will return to the top.”

The week of central banks

In addition to geopolitical risks, investors will be focusing on several central bank meetings in the coming week. Interest rate decisions are due in the coming days for a total of six major industrialized countries. In addition to the US Federal Reserve, the Bank of Japan, the Bank of England, the Swiss National Bank, and the Norwegian and Swedish central banks will also be meeting.

Important economic and business events this week

Monday, 16. June

Canada: Second day of the G7 summit (Sunday to Tuesday) in Alberta

Tuesday, 17. June

Japan: BoJ interest rate decision. Deutsche Bank expects the target range for the short-term key interest rate to remain unchanged. The chief economist for Japan sees no significant changes in the economic and inflation outlook and expects the Bank of Japan to continue to point to the high level of uncertainty due to tariff policy. Colleagues at Commerzbank expect the central bank to review its bond purchases.

11:00 a.m. Germany: ZEW index. Following the positive Sentix data last week, Deka also expects an improvement in the ZEW economic situation and expectations for Germany. According to economists, hopes for an easing of trade disputes and fiscal support are fueling greater economic optimism. The consensus estimate is 34 points, up from 25.2 points in May.

2:30 p.m.: USA: Retail sales. Commerzbank strategists assume that advance effects due to tariffs in March and April supported sales. As this effect is unlikely to have played a role in May, they expect retail sales to decline by 0.7 percent this time.

Wednesday, 18. June

8:00 p.m. USA: Fed interest rate decision. Economists agree that the US Federal Reserve will leave its key interest rate unchanged, even though US President Donald Trump is vehemently calling for an interest rate cut. Deka also sees little need for change in the Fed's statement. However, the projections are likely to be adjusted. A downward revision of the growth outlook and an upward revision of the inflation outlook for this year are expected.

Thursday, 19. June

Interest rate decisions by several central banks (including the UK and Switzerland)

Stock market holiday in the US (all markets closed)

Friday, 20. June

Around 1 p.m.: Major expiration date on the world's major futures markets.

By Thomas Koch, 10 June, 2025, © Deutsche Börse AG