DAX Drops Below 24,000 as Oil and Inflation Jitters Trump Improved Operating Margins

German blue-chip profits climb 4.4% despite revenue drop, but DAX falls below 24,000 as Brent crude surges above $107, fueling inflation fears and a rotation out of cyclicals.

German blue-chip companies are raking in more profit on less revenue, yet the stock market is retreating. The DAX closed Friday at 23,950 points, shedding 2.07% on the week’s final session and breaching the key 200-day moving average at 24,128. The divergence between corporate earnings and market sentiment is widening.

Quarterly results from the 40 constituents revealed a stark split: aggregate revenue fell 3.7% while operating profit climbed 4.4%. The financial sector led the charge with a 15.9% earnings surge, benefiting from the sustained higher interest rate environment. Deutsche Telekom posted the biggest operating profit at €5.8 billion, followed by Allianz at €4.5 billion and Eon at €3.9 billion. Double-digit profit growth was also recorded at Siemens Energy and Munich Re.

Yet the broader market mood soured over the past week, driven by a near 6% rally in Brent crude oil to above $107 a barrel. Geopolitical tensions in the Middle East and fresh inflation fears pushed German bond yields higher, prompting a rotation out of cyclical European equities into defensive plays and US software stocks. Industrial heavyweights bore the brunt of the selling: HeidelbergCement slumped 7.16%, while Siemens and MTU Aero Engines each lost roughly 5%.

The auto sector was a particular weak spot in the quarterly earnings season. Every German carmaker reported lower profits, and both Zalando and Porsche Holding swung into the red. The broader industrial strain is also evident in hiring: first-quarter DAX employment fell 1% to 3.13 million, a reduction of about 31,000 jobs. Outside the index, Bosch plans to cut up to 22,000 positions in its automotive supply division.

Lufthansa provided a mixed picture. Revenue rose 8% to €8.7 billion, and the operating loss narrowed by €110 million to €612 million. However, kerosene costs of €1.7 billion weighed heavily. The airline reaffirmed its full-year outlook for operating profit well above €1.96 billion.

Chart watchers now have their eyes on near-term support. The 23,870 level is the next line of defense; a break below that could open the door to 23,700. The index sits 5.8% below its all-time high, and the relative strength index at 82.7 suggests the market was overbought heading into the sell-off.

Attention shifts to the coming week. German building permits data is due Monday. Midweek, US consumer and producer price reports will be critical for Federal Reserve rate expectations. Nvidia’s quarterly results on Wednesday could set the tone for global tech sentiment. Whether the defensive strength of financial and utility stocks can continue to mask the cyclical weakness in manufacturing will determine if the DAX can reclaim the 24,000 mark.