EBC Markets Briefing | German stocks skid; Stryker rallied

The DAX 40 closed much lower on Tuesday as dimming hopes for a US-Iran peace deal weighed on risk sentiment. ZEW economic sentiment unexpectedly improved in May, although it remained in negative territory.

Germany's inflation accelerated slightly to 2.9% in April. ECB policymaker ⁠Joachim Nagel said the bank must raise interest rates if the oil shock threatened to unmoor inflation expectations in the euro zone.

Trump has said lately he will give the EU until July 4 to ratify its trade agreement with the US, threatening to raise tariffs to "much higher" levels if the bloc fails to deliver.

German exports rose unexpectedly in March, lifted by higher demand from Europe. The US remains the biggest destination for the goods, which means higher tariffs would be impactful.

DAX Q1 earnings declined 8% year-over-year despite surpassing consensus estimates by 5%, according to Deutsche Bank Research. The major drag remained carmaking companies.

The study also predicts earnings growth outside of the automotive sector to accelerate in the second half of the year. However, it also revised down earnings growth estimate for this year to 7%.

The DAX 40 showed the head and shoulders pattern, which indicated more losses ahead. In a base scenario, the index will weaken to the neckline around 23,820.

Asset recap

As of market close on 12 May, among EBC major products, Stryker shares led gains, although Argus lowered its price target on the company on cyberattack impact while maintain Buy rating.

Chip stocks pulled back from a massive rally that broadened the AI trade beyond Nvidia and propelled the sector higher. That dealt a heavy blow to Qualcomm which just hit a record high.

Analysts warned that South Korea's reliance on a narrow group of exporters could amplify volatility and leave markets vulnerable to shocks ranging from geopolitical tensions to a slowdown in data-centre spending.

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