DAX Rides Rotation and Rate Cut Hopes to Best Week Since April, Breaches 25,827 Intraday Record

German blue-chip index surges 4.49% weekly, piercing 25,827 intraday record, driven by rate-cut hopes and Berlin's reform package, with analysts targeting 27,500.

The first week of July delivered a jolt of optimism to Frankfurt, with the DAX posting its steepest weekly gain since April and piercing a fresh all-time intraday record. The German blue-chip index climbed 0.78% on Friday alone to close at 25,779.31 points, having earlier touched 25,827 — a new milestone that came even as Wall Street sat idle for the U.S. Independence Day holiday. On a weekly basis, the advance totalled 4.49%, the strongest such stretch in more than two months.

Behind the rally sat two powerful tailwinds. A surprisingly soft U.S. jobs report fuelled fresh bets on Federal Reserve rate cuts, while Berlin’s recently approved reform package injected domestic confidence. That combination prompted a sector rotation that lifted both defensive names and cyclical industries. “The momentum had been building over the past few days, with the focus shifting to cyclical plays,” noted Andreas Lipkow, market analyst at CMC Markets. Autos, chemicals and machinery stocks provided the thrust.

The chart picture reinforced the bullish mood. The DAX now sits 4.42% above its 50-day moving average, while the 14-day Relative Strength Index reads 66.3 — elevated but not yet flashing overbought conditions. Analysts at DZ Bank, who reaffirmed their year-end target of 27,500 points, highlighted the inverse head-and-shoulders pattern that had broken higher. The technical objective of that configuration sits in the 27,500 area, implying roughly 6.7% upside from Friday’s close. The VDAX-NEW volatility barometer eased in sympathy, confirming waning anxiety among traders.

On the sector front, utilities led the pack. E.ON shares surged 4.4% to top the DAX leaderboard, while RWE added 1.7%. Both stocks benefited from the rate-cut narrative and the reform-related tailwind for infrastructure-heavy names. Elsewhere, Continental advanced 1.6% after announcing the sale of its Contitech division to private equity firm Lone Star Funds. Infineon climbed 1.4% as Berenberg lifted its price target to €100 following the opening of the chipmaker’s new Dresden plant.

Rheinmetall proved the day’s biggest laggard, dropping between 2.0% and 2.7% depending on the data feed. The defence group lost a frigate contract — the F126 order from Germany’s Ministry of Defence — and now expects revenue shortfalls of up to €300 million this year. The broader mid-cap index, the MDax, outpaced its large-cap sibling, rising 1.38% to 32,994.37 points.

The strength extended across Europe. The EuroStoxx 50 hit its own all-time high, gaining 0.8%, and Switzerland’s SMI also notched a record. London’s FTSE 100 settled for a more modest 0.25% rise. With U.S. markets dark for the holiday, the DAX had to generate its own momentum — and succeeded. The DZ Bank noted that international investors, who had been underweight Germany for months, were now rotating capital back into the region.

The coming week presents a sparse data calendar. Monday’s ISM services index for the United States is the only major release on the horizon, and corporate earnings season proper does not begin until mid-July with the big U.S. banks. Until then, Frankfurt’s focus will be on how Wall Street digests the European record highs once trading resumes. The German government is also due to present its 2027 budget draft on Monday, offering another potential catalyst.

Helaba framed the moment with a sporting analogy: “For the German national football team, the tournament is already over, but for equities, the second half has just begun.” Whether the DAX can push through the 26,000 threshold will depend on whether the rotation into cyclicals and defensive plays persists — and whether the positive signals from the labour market and domestic policy continue to outweigh the risks lingering in the tech-heavy U.S. market.