Weekly outlook: ‘The genie is out of the bottle’

Three extremely strong weeks have lifted the DAX above the 23,000-point mark, making up for the ‘Liberation Day’ dip. However, uncertainty remains high.

5 May 2025. FRANKFURT (Frankfurt Stock Exchange). Over 4,000 points in less than four weeks – a rapid recovery rally has brought the DAX back close to its all-time high of 23,476 points in March. ‘The weekly results show that investors are regaining confidence,’ explains Helaba analyst Claudia Windt. The assumption is that US President Trump has no interest in escalating the global trade conflict. However, the latest corporate reports and economic growth data show that both companies and consumers are bracing themselves for higher prices and disrupted supply chains. ‘The genie is out of the bottle and is unlikely to be put back in again within the 90-day deadline.’

‘Uncertainty will weigh on the economy’

Ulrich Kater from DekaBank shares this view. Although the US government suspended most of the tariffs shortly after announcing the comprehensive tariff increases on 2 April (‘Liberation Day’) and signalled its willingness to negotiate, ‘uncertainty among private households and companies remains high, which is likely to weigh on the economy in the coming months.’

On Monday morning, the DAX stood at around 23,140 after closing at just under 23,087 points on Friday. The Stoxx Europe 600 also rose sharply recently, as did the US markets. The S&P 500 and Nasdaq 100 have now offset the price declines seen at the beginning of April.

Hopes for infrastructure programme

Sören Hettler of DZ Bank expects the White House to remain the focus of market participants, at least for the time being. ‘The stock markets are therefore likely to remain bumpy, as a short message from Trump is enough to tip the mood in one direction or the other.’ Only in the medium to longer term could other issues come to the fore. ‘These include tax cuts in the US and the infrastructure programme of the future German government,’ explains Hettler. The latter has the potential to boost economic growth in Germany in the long term. ‘This mix of factors should pave the way for an upward trend, possibly even leading to new record highs for the stock indices.’

Quarterly reports ‘convincing overall’

After an extremely busy week, the coming days are likely to be rather quiet. The highlight is likely to be the US Federal Reserve meeting on Wednesday. In addition, the reporting season continues. According to DZ analyst Hettler, slightly more than two-thirds of the companies listed in the S&P 500 have already presented their figures. Overall, they have delivered convincing sales and earnings. ‘Profits in particular were well above market participants‘ prevailing expectations.’ In Europe, the reporting season is still in its early stages. ‘However, the reports already published look good, especially in terms of profit development, as they are moderately above the market consensus,’ says Hettler.

Important economic and business events of the week

Monday, 5 May

Many Asian stock exchanges are closed, and there is no trading in London due to a bank holiday.

Wednesday, 7 May

8:00 a.m. Germany: Industrial orders for March. Commerzbank expects orders to have risen by 1.5 per cent compared with the previous month and also expects a significant increase in the more meaningful core figure excluding large orders.
 

8 p.m. USA: Interest rate decision by the US Federal Reserve. The US Federal Reserve is likely to leave its key interest rate unchanged at 4.25 to 4.5 per cent, according to Deutsche Bank – despite ongoing pressure from the White House to lower interest rates.

Thursday, 8 May

8 a.m. Germany: Industrial production/exports for March. DekaBank points out that German gross domestic product performed surprisingly well in the first quarter, partly due to US imports being brought forward to avoid tariffs. These are also likely to have boosted German exports in March.

1:00 p.m. United Kingdom: Bank of England interest rate decision. According to DekaBank, the Bank of England has so far stuck to quarterly interest rate cuts. At its interest rate decision in May, it is likely to cut the key interest rate for the fourth time to 4.25 per cent.

Friday, 9 May and Saturday, 10 May.

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by: Anna-Maria Borse, 5 May 2025, © Deutsche Börse AG