The DAX Index and Nasdaq 100 are entering a pivotal week marked by major corporate earnings reports, key central bank decisions, and ongoing geopolitical tensions from the US-Iran war. Both indices have seen significant movements in recent weeks, with the DAX pulling back from highs while the Nasdaq 100 trades near record levels.
DAX Index: Earnings, ECB, and Energy Risks
The German DAX Index has retreated from its monthly high of €24,800 to the current €24,128. This week, the index will be driven by the earnings season for top German companies, including Deutsche Boerse, Deutsche Bank, Mercedes-Benz, Adidas, Porsche, Deutsche Post, BASF, Volkswagen, Linde, and Infineon. Early indications suggest mixed results: Deutsche Bank is expected to benefit from strong trading activity amid the Iran conflict, while automakers like Mercedes-Benz and Volkswagen face headwinds from weak demand in China and the US. BASF has performed well due to its diversification into China, while Adidas struggles with waning demand.
The European Central Bank (ECB) will announce its interest rate decision on Thursday. Economists polled by Reuters expect the bank to hold rates steady, citing the need to assess the economic impact of the Iran war. However, bond markets anticipate a potential rate hike later this year as inflation remains above the 2% target.
The ongoing US-Iran war, currently in an open-ended ceasefire, is a major wildcard. Soaring energy prices (Brent and WTI above $100) are hurting German companies reliant on imported energy. A resumption of peace talks would be bullish for the DAX, while an escalation could push the index lower.
Nasdaq 100: Tech Earnings, Fed Decision, and Geopolitics
The Nasdaq 100 and the QQQ ETF are at all-time highs, driven by a risk-on sentiment during the Iran ceasefire. This week, the focus will be on earnings from the Magnificent Seven—Microsoft, Amazon, Google, Meta Platforms, and Apple—as well as other tech giants like Qualcomm, Rivian, Twilio, Block, Atlassian, and Roblox. Early S&P 500 results show average earnings growth of 15%, exceeding the expected 13%. The key question is AI spending return on investment, especially after Microsoft's previous hint of a $100 billion capital expenditure, which caused its stock to dip. The earnings will also reveal if software companies like ServiceNow are under threat from AI growth.
The Federal Reserve's interest rate decision on Wednesday, likely the farewell decision by Chair Jerome Powell, is another key catalyst. The consensus is for rates to remain unchanged at 3.50%-3.75%, given rising inflation (CPI at 3.3% in March) and a strong labor market. A dovish tone could boost the Nasdaq 100, while a hawkish stance might trigger a pullback.
The US-Iran ceasefire remains fragile. With no talks happening and Iran warning against the blockade, the risk of a prolonged war remains high. This could push oil prices higher and negatively impact the stock market.
Technical Analysis
The DAX Index is hovering above its 50-day Exponential Moving Average and has formed an inverted head-and-shoulders pattern, a bullish reversal signal. This suggests a potential rebound towards the €25,000 resistance level.
