DAX Clinches Best Weekly Gain Since April as Reform and Dovish Fed Fuel Rally

Germany's DAX surged 4.5% weekly, closing at 25,779, driven by Berlin's reform package and cooling US rate hike fears. Sector rotation lifts utilities, while 26,000 is next key resistance.

Germany’s DAX index sealed its strongest weekly performance since April, driven by a potent mix of domestic political reform and fading US rate hike fears that pushed the benchmark to a third consecutive record high on Friday. The blue-chip gauge closed at 25,779.31 points, adding 0.78% on the day, and posted a weekly gain of 4.5% — a feat not seen in three months. In just three trading sessions, the index has already amassed more upside than it managed in the entire first half of the year.

The catalyst for the latest leg higher came from two directions. Berlin’s freshly passed reform package, combined with earlier pension changes, provided a tangible policy boost to investor sentiment. Across the Atlantic, softer-than-expected US labour market data cooled expectations of an imminent Federal Reserve rate increase. Traders now put the probability of a July hike at only 17%, a sharp drop from 29% the prior day.

The DAX opened Friday at an all-time high of 25,763.97 points and accelerated in the afternoon to a fresh intraday peak of 25,826.78. The index now sits a mere 0.18% below that record, with a year-to-date advance of 5.05% and a 12-month gain of 7.71%. The Relative Strength Index reads 66 — bullish territory but not yet overbought.

A clear sector rotation defined the session. European utilities stocks hit their highest level since April, as waning rate worries lifted capital-intensive names. E.ON led the DAX with a 4.4% surge, buoyed by a positive sector study from Morgan Stanley. Infineon joined the rally, climbing 1.4% as a rebound in Asian AI chip stocks spilled into Frankfurt. The chipmaker also celebrated the opening of a new mega-factory in Dresden, though the stock’s gains were tempered by lingering concerns over the impact of the AI boom on traditional software providers.

Not all sectors shared the cheer. SAP shed 1.5%, while Rheinmetall dropped 1.9% after a regulatory halt on the construction of six F126 frigates dealt a setback to the defence group. The second-line MDax outperformed, rising 1.38% to 32,994.37 points, although it remains well shy of its five-year record.

The macro backdrop remains mixed. The eurozone composite PMI stabilised at exactly 50 in June, but Germany’s private sector continued to contract, weighed down by services. Across the Atlantic, the Dow Jones hit a fresh record at 52,900 points on Thursday, while the tech-heavy Nasdaq slipped 0.8% as investors shifted from AI darlings into laggards and cyclical plays. US markets were closed on Friday for the 250th anniversary of the nation’s founding.

Chart watchers identify the round 26,000 mark as the next major upside hurdle. DZ Bank maintains its year-end target of 27,500, implying roughly 7% further upside. On the downside, support is seen at 25,581 points, with the new all-time high forming immediate resistance.

All eyes now turn to the European Central Bank, whose next rate decision falls on 22–23 July. Market participants will parse June inflation data and signals from the ECB’s Sintra forum, where President Christine Lagarde and chief economist Philip Lane are expected to shape expectations. The second-quarter earnings season also kicks off next week, offering hard data on corporate resilience in the current rate environment.

For the DAX to mount a sustained assault on 26,000, the recovery in technology stocks must hold and US rate concerns need to stay muted. Should the index slip below its recent highs, consolidation pressures will likely reassert themselves. For now, the combination of policy tailwinds and a dovish Fed has the German benchmark on a run that even the strongest first-half performance couldn’t match.