The DAX is set to give back some of its gains on Friday, with broker IG Markets calling the German benchmark 0.6% lower at 25,500 points ahead of the Xetra open, according to Wallstreet Online. The pullback follows a 1.4% rise on Wednesday and comes as futures on the Nasdaq 100 drop 1.3%, Bloomberg data cited by the outlet shows. Brent crude climbed to around $111 a barrel after fresh attacks on targets in Saudi Arabia.
Why it matters
The combination of expensive oil and a weakening tech sector leaves Europe's leading index without a clear direction. Wallstreet Online describes the DAX as stuck in a sideways range, with no consensus on whether it breaks higher or lower. For investors, the question is whether corporate earnings can carry the market while energy costs and interest-rate expectations pull the other way.
A trading market, not a trend
Thomas Altmann of QC Partners told Wallstreet Online that the current environment rewards quick moves rather than conviction. In his view, investors are buying dips and selling rallies with equal speed. He noted that Germany's reporting season is going reasonably well, but that the DAX has little independent momentum when Asian markets and US futures are weak.
The oil move has a direct cause. Houthi rebels based in Yemen struck targets in Saudi Arabia again, killing at least three people, according to the report. Washington is withdrawing some diplomats and their families from the kingdom, and the market does not expect a rapid de-escalation.
SAP delivers, with a caveat
SAP offered the clearest counterweight to the gloomy mood. The software group reported on Wednesday evening that its cloud backlog rose 26% at constant currencies to €24.1 billion in the third quarter, while cloud revenue grew 25% to €6.67 billion. Adjusted operating profit jumped 18% to €3.03 billion, Wallstreet Online reports.
Chief executive Christian Klein now aims for the upper end of the company's cloud growth guidance. Finance chief Dominik Asam, however, flagged risks in the important final quarter of the year. The shares gained about 2% in pre-market trading. Wallstreet Online's assessment is that the stock is no longer cheap after its recovery.
Wall Street's mixed signals
The prior US session had offered some encouragement. The S&P 500 added 0.6% to 7,757 points and the Nasdaq Composite rose 1.1%, per the report. SpaceX provided much of the lift, jumping 7.8% after the Elon Musk-led space company reported its first profit as a listed business. Super Micro Computer gained 9.6% on a strong outlook, which Angelo Kourkafas of Edward Jones said could help ease doubts about artificial intelligence spending.
Telecom stocks moved the other way. AT&T fell 6.5% as investors weighed SpaceX as a potential new competitor in mobile services.
After the close, Meta reported revenue up 26% to $64.6 billion but set aside almost $10 billion for legal disputes, and a judge in New Mexico imposed a $25 billion penalty on the company. Meta still plans to spend up to $145 billion this year on artificial intelligence and data centres. "Our investments are paying off," Mark Zuckerberg said, according to the report, and the stock rose about 2% after hours. Tesla's profit fell 43% to $787 million, and its shares turned negative in late trading after the company cut planned investment, Bloomberg reported.
Central banks in focus
Currency markets are pausing before a week packed with central bank meetings. The European Central Bank is expected to hold its key rate at 2.5%, though a hike before year-end is seen as all but certain, Wallstreet Online reports. Traders price a 90% chance of a Federal Reserve rate increase in December, according to CME data cited by the outlet. The euro is holding above $1.12 despite budget concerns in France.
Gold fell 1.1% to $4,094 an ounce, its lowest since 14 October. Kelvin Wong of OANDA attributed the decline to inflation fears stoked by costly oil, which reinforce expectations of prolonged high rates and reduce the appeal of the non-yielding metal.
The coming week's rate decisions are likely to set the tone for the DAX.
