Will Dax Lead A European Stock Market Rebound After German Debt Deal & Ukraine Talks?
This week stock markets extended losses, but with the rebound on Friday, the German Dax index closed at the same levels as last week.
After nearly a month of weakness in European stock markets, investors started Friday on a cautious note, still digesting recent losses. However, by the end of the day, markets staged a strong rebound, offering hope that this could be more than just a temporary bounce.
Several major developments across Europe contributed to the turnaround, fueling optimism that the worst of the recent selloff may be over.
German Debt Deal Sparks Optimism
One of the most significant headlines was the incoming German government’s agreement on a debt deal with the Greens, which ensures the proposal will pass a vote next week. While this resolution came quickly—so much so that many expected more political drama from the Greens—the market reacted positively.
The euro gained strength, briefly pushing EUR/USD above 1.0900, while German 30-year bond yields climbed to 3.24%, nearing their highest levels since 2011.
The DAX led the equity market rally, gaining nearly 2% on the day. Meanwhile, US stock futures also pointed higher, indicating that dip buyers were stepping back in after recent losses.
European Markets End Higher for the Day but Lower for the Week
Daily Performance of Major European Indices:
- German DAX: +1.86%, closing at 22,986.82 (+419.68 points).
- France’s CAC 40: +1.13%, closing at 8,028.28 (+90.07 points).
- UK’s FTSE 100: +1.05%, closing at 8,632.33 (+89.77 points).
- Spain’s IBEX: +1.43%, closing at 13,005.20 (+183.90 points).
- Italy’s FTSE MIB: +1.73%, closing at 38,655.30 (+655.57 points).
Weekly Performance: Mostly Negative Trends Persist
- German DAX: -0.30% – Slight weekly decline after recent strength.
- France’s CAC 40: -1.14% – The weakest performer of the week.
- UK’s FTSE 100: -0.55% – Small weekly decline.
- Spain’s IBEX: -1.90% – The sharpest drop among major European indices.
- Italy’s FTSE MIB: +0.16% – The only index to post a slight weekly gain.
Year-to-Date Performance: Strong Gains Across Europe
- German DAX: +15.22% – Leading European gains.
- France’s CAC 40: +8.77% – Strong but lagging behind Germany.
- UK’s FTSE 100: +5.62% – Modest growth compared to peers.
- Spain’s IBEX: +12.16% – Among the best-performing indices this year.
- Italy’s FTSE MIB: +13.07% – Showing resilience and strong momentum.
Key Resistance and Support Levels for Major European Indices
German DAX (22,986.82)
- Immediate resistance: 23,200–23,300 – A break above this zone could trigger further upside momentum.
- Key resistance: 23,500–23,750 – This is the next major hurdle, where selling pressure may emerge.
- Support levels: 22,800 and 22,500 – A drop below 22,500 could signal further weakness.
France’s CAC 40 (8,028.28)
- Immediate resistance: 8,100–8,150 – Short-term target for further gains.
- Key resistance: 8,250–8,350 – A breakout here would indicate renewed strength.
- Support levels: 7,950 and 7,850 – A break below these levels could lead to more selling pressure.
UK’s FTSE 100 (8,632.33)
- Immediate resistance: 8,700 – The index needs to reclaim this level for sustained upside.
- Key resistance: 8,800–8,850 – A move above would signal a potential breakout.
- Support levels: 8,550 and 8,500 – A break below could lead to further downside.
Spain’s IBEX (13,005.20)
- Immediate resistance: 13,100–13,200 – A move above could bring further gains.
- Key resistance: 13,400–13,500 – This is a critical level for upside continuation.
- Support levels: 12,900 and 12,750 – Breaking below could lead to a deeper pullback.
Italy’s FTSE MIB (38,655.30)
- Immediate resistance: 38,800–39,000 – A break above this zone could trigger further bullish momentum.
- Key resistance: 39,500–40,000 – A breakout here would reinforce a strong uptrend.
- Support levels: 38,300 and 38,000 – A drop below 38,000 could signal increased selling pressure.
Eurozone Economic Growth Outlook Remains Stable
According to a Reuters poll and European Central Bank (ECB) estimates, the Eurozone economy is expected to grow by 0.9% in 2025 and 1.3% in 2026. These forecasts remain largely unchanged from February, when growth was projected at 0.9% and 1.2%, respectively.
Meanwhile, ECB policy expectations suggest that by the end of 2025, the central bank will lower the deposit rate to 2.00%, with 40 out of 75 economists predicting this shift.
US-EU Trade Tensions Escalate, But Negotiations Underway
Trade tensions between the US and the EU remain a point of concern. Earlier this week, President Donald Trump imposed a 25% tariff on steel, aluminum, and derivative imports from Europe, impacting €26 billion worth of EU exports.
The EU responded swiftly, introducing retaliatory measures targeting a wide range of American goods. However, a potential resolution may be on the horizon. On Friday, EU Trade Chief Maroš Šefčovič revealed that he had held significant discussions with US Commerce Secretary Lutnick, signaling that both sides may be working toward a compromise.
Conclusion: Is the Market Rebound Sustainable?
Friday’s rally in European stock markets, led by the DAX, signals that investors may be regaining confidence, especially following the German debt deal and potential trade resolution talks. While economic growth forecasts remain stable and ECB rate cuts are expected by 2025, trade tensions between the US and EU remain a key risk factor.
Investors will now closely watch next week’s economic data, central bank updates, and trade negotiations to determine whether this bounce marks a lasting recovery or just another temporary uptick.
German Dax Index Live Chart
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