Investor sentiment remains cautious despite supportive measures from the US Federal Reserve. The DAX is expected to open flat after recent profit-taking, with geopolitical uncertainties affecting market confidence. While the Fed maintains interest rates, expectations of future cuts bolster optimism. In corporate news, RWE faces a significant earnings drop, while Mercedes advocates for tariff removal amid trade tensions. Additionally, SoftBank’s $6.5 billion acquisition of Ampere Computing reflects its focus on AI advancements.
Investor Caution Amid Fed Support
While the US Federal Reserve offers a supportive backdrop, investors are adopting a cautious stance today. The DAX is anticipated to show minimal movement at the beginning of trading, and further profit-taking remains a possibility.
According to broker IG, the DAX is set to open flat at 23,288 points, mirroring the previous day’s close before Xetra trading commences. Following a record high achieved on Tuesday, investors engaged in profit-taking yesterday, resulting in the German benchmark index closing down by 0.4 percent.
Geopolitical Concerns and Economic Outlook
Ongoing uncertainties surrounding the tariff policies enacted by US President Donald Trump are weighing heavily on investor sentiment. Michaël Lok, chief investment strategist at asset manager UBP, commented, “His unpredictable approach amplifies geopolitical risks and destabilizes global markets, with tariffs potentially leading to increased inflation and stunted growth in the US.”
Support from the US Federal Reserve has provided a silver lining. The central bank opted to maintain the key interest rate between 4.25 to 4.50 percent, and the prospect of two interest rate cuts later this year has bolstered investor optimism. Ulrich Stephan, chief investment strategist for private and corporate clients at Deutsche Bank, noted that the Fed’s expectations of easing rates have offered strong backing to stock markets.
Michael Heise, chief economist at HQ Trust, highlighted the significance of US trade policy, suggesting that if tariff threats are implemented selectively, the central bank will likely focus more on economic conditions and employment, enabling a significant reduction in interest rates throughout the year.
Meanwhile, the Shanghai Stock Exchange displayed little movement in the morning session, with the local benchmark index holding steady at 3,424 points. The index tracking major companies in Shanghai and Shenzhen experienced a slight decline of 0.4 percent, settling at 3,994 points. Trading was inactive on the Japanese stock exchange.
In China, interest rates have remained unchanged for the fifth consecutive occasion, aligning with market expectations. Wang Qing, chief macro analyst at Golden Credit Rating, remarked, “The impact of the trade war is not yet fully apparent, hence the urgency for an interest rate cut is not currently pressing.”
In corporate news, RWE reported a significant decline in adjusted earnings before interest, taxes, and depreciation, dropping over 25 percent to approximately 5.7 billion euros last year. However, analysts had anticipated an even steeper decline. Looking ahead to 2025, the company projects operating results between 4.55 and 5.15 billion euros.
From 2025 to 2030, RWE has revised its investment plans to 35 billion euros, which is 10 billion euros less than previously anticipated, citing increased uncertainties, supply chain disruptions, geopolitical tensions, and rising interest rates as contributing factors.
In the automotive sector, Mercedes CEO Ola Källenius has advocated for the removal of all tariffs on vehicles amidst the US-EU trade dispute. He noted, “Currently, there is a 10 percent fee on every passenger car imported from the US into Europe, while the opposite rate is only 2.5 percent. Eliminating these tariffs would establish reciprocity and foster growth instead of hindering it,” Källenius stated in an interview with Handelsblatt.
Contrarily, US President Donald Trump dismissed a similar proposal as inadequate during his initial term in 2018. Recently, he announced plans to impose a 25 percent import tariff on European-made cars starting April 2.
In notable investment news, Japanese technology giant SoftBank has declared its acquisition of US chip startup Ampere Computing for $6.5 billion. As part of this transaction, Ampere’s major investors, Oracle and the Carlyle Group, will divest their stakes in the company. This acquisition aligns with SoftBank’s strategic focus on advancing artificial intelligence technologies.