DE40: European Equities' Recovery Stalls

• European indices saw a positive start, but gains have been pared back within the first few minutes of trading. 
• Only a handful of companies in Germany's DAX index are currently showing gains. 
• Investors are awaiting the release of Eurozone CPI inflation data, which will be crucial for guiding the European Central Bank's (ECB) upcoming decision this Thursday. 
• The market is also anticipating further developments regarding the trade situation between China and the US.

What's Happening in Europe?

The rally on European bourses was short-lived, failing to sustain the positive sentiment from the Asian session. Investors are hoping for positive outcomes from discussions between Donald Trump and Xi Jinping. A phone call is expected this week, though it has not been confirmed by the Chinese side.

It's worth noting the growing political unease in Europe. Following the victory of an opposition and right-wing presidential candidate in Poland, the Dutch government has collapsed due to a lack of agreement on migration talks.

From a European perspective, May's CPI inflation data will be released at 11:00 AM CET (10:00 am BST). After inflation held at 2.2% in April, it is now expected to finally drop to 2.0% year-on-year, which would reinforce the ECB's need for further interest rate cuts. A cut at Thursday's meeting is almost fully priced in, and the market anticipates one more move this year, likely in September or October, which would bring the deposit rate to 1.75%.

A Technical Look at the DAX

The German DAX (DE40) is pulling back from resistance around 24,000 points, negating yesterday's recovery. Notably, it recently broke out of its upward trend channel. Nevertheless, the DE40 remains in a strong uptrend, although the pace of growth has decelerated for the second time. Key support for the futures contract is at the start of the last major downward wave, around 23,500 points, from where the price has rebounded several times in recent weeks. If pressure on the equity market intensifies and this support is breached, the potential move could extend the DE40 towards the 78.6% Fibonacci retracement, where price reactions have also been observed previously.

Source: xStation5

The German DAX can still boast very strong growth since the beginning of this year. Currently, few assets are performing better, including gold. However, a return of approximately 20% is incomparably better than the S&P 500, which is only just breaking even after a very weak February and March.

Source: Bloomberg Finance LP

Who's Gaining and Losing in the German DAX?

Despite initial declines on the German DAX, the number of companies moving into positive territory is increasing. MTU Aero Engines, Deutsche Telekom, and Rheinmetall are currently performing strongest. On the other hand, Heidelberg Materials is seeing declines. What are the most important recent company news items?

• Deutsche Telekom has acquired broadcasting rights for four major football events from 2025-2027. One of the company's directors expects significant earnings from these transmissions. 
• Rheinmetall is rebounding after yesterday's declines, which were linked to an article concerning potential excessive taxes targeting highly profitable companies, particularly those in the defence sector. It's worth noting, however, that many countries, including the UK and Poland, intend to further increase defence spending. 
• Rheinmetall is set to replace Kering in the Euro Stoxx 50 index. JP Morgan indicates that this move could occur on June 20. Interestingly, it will be the only defence company in the index of Europe's largest companies. Notably, Rheinmetall's shares have tripled in value this year, while Kering has lost 28% of its value. The Euro Stoxx 50 index is marginally positive this year.

Source: Bloomberg Finance LP