DAX Scales Fresh Peak at 26,319 as Dovish Fed Bets and Geopolitical Thaw Converge

Frankfurt's DAX closes at record 26,319.45 as cooling Iran tensions and soft US jobs data boost equities, despite mixed earnings from Allianz and Daimler Truck.

Frankfurt's benchmark index carved out another record close on Friday, with the DAX finishing at 26,319.45 points — a 0.69 percent advance that capped a session where two very different tailwinds happened to blow in the same direction.

The catalyst mix was unusual. On one hand, cooling tensions in the Iran conflict removed a geopolitical overhang that had been weighing on risk appetite. On the other, a soft US jobs report reinforced the case for the Federal Reserve to hold off on further tightening, a prospect that tends to funnel capital toward equities. The S&P 500 also sealed its own record high on Friday, with the tech-led momentum spilling across the Atlantic.

Jobs Data Reshapes the Fed Calculus

The July US payrolls figure landed well short of expectations — the economy shed 23,000 positions against forecasts of 80,000 to 85,000 new hires. The unemployment rate ticked up only modestly to 4.1 percent, but a more telling detail lurked beneath the headline: labor force participation slid to its lowest level since April 2021, suggesting a growing number of Americans are stepping away from the job market entirely. Corporate layoff announcements from the likes of Microsoft, Uber and Visa have done little to bolster confidence.

Traders responded by repricing Fed policy. The implied probability of a September rate hike tumbled from 55 percent to 44 percent in one account of the data, while another reading put the drop even steeper, from 67 percent to 44 percent. Bond yields eased alongside, and the dollar softened — a combination that historically greases the wheels for stock markets.

Allianz Profits but Fails to Please

The earnings calendar delivered a decidedly mixed bag beneath the index's record surface. Allianz posted second-quarter figures that were solid on the surface — business volume up 5.7 percent, operating profit ahead 10.6 percent — yet the adjusted net income figure fell 12.7 percent, and shareholders opted to bank gains rather than hold. The stock ranked among the day's biggest drags on the DAX.

Analyst reactions diverged. DZ Bank reaffirmed its buy recommendation and lifted its price target from 420 to 486 euros, while RBC stayed more circumspect with a "Sector Perform" rating and a 440-euro target.

Deutsche Bank Steals the Show

The clearest bright spot came from Deutsche Bank. Second-quarter earnings per share reached 0.57 euros, with revenue climbing 9 percent to 8.5 billion euros. Warburg Research upgraded the stock to "Buy" and raised its target from 34.60 to 39.00 euros, while RBC, DZ Bank and J.P. Morgan all maintained their bullish stances. Adding an internal vote of confidence, supervisory board member Klaus Moosmayer purchased shares in the open market.

Elsewhere, the picture was less flattering. Daimler Truck saw profits collapse 48 percent despite a 5 percent revenue gain to 12.3 billion euros — though management still raised its full-year guidance. Munich Re, meanwhile, delivered a standout quarter, posting net income of 2.211 billion euros against analyst expectations of 1.786 billion, helped by an unusually benign major-loss ratio of 4.9 percent versus the 18 percent that had been forecast. The reinsurer confirmed its 6.3 billion euro annual profit target but trimmed its revenue outlook from 40 billion to 38 billion euros, citing softer pricing in primary insurance.

Rheinmetall faced a different kind of adjustment. After the F126 frigate project fell through, the defense group cut its sales forecast by 300 million euros to a range of 13.7 to 14.2 billion. Operationally, though, the first half told a more vigorous story: revenue jumped 39 percent to over 5 billion euros, operating profit surged 74 percent to 786 million euros on a 15 percent margin, and the order book stands above 80 billion euros. A multibillion-euro Boxer vehicle order worth 12.4 billion euros is also in the pipeline. Zalando slipped despite respectable numbers, while Nordex and Mutares stood out among smaller caps.

Overbought Signals Cloud the Celebration

Technical indicators are starting to flash amber. The DAX's 14-day RSI sits at 69.7 — just shy of the threshold where traders typically declare a market overbought. Market observers looking back at calendar week 32 flagged the risk of overheating, pointing to thin summer liquidity, elevated valuations and unfavorable seasonality as potential tripwires, particularly for semiconductor, AI and space-related names.

The macro debate adds another layer of uncertainty. Investor Michael Burry has warned of a crash reminiscent of 1987, though a Seeking Alpha contributor pushes back, arguing that fundamental indicators don't currently point to an imminent downturn and that modern circuit breakers make a repeat of that scenario less plausible. Another analysis notes that several of the four commonly watched US recession indicators — real incomes, industrial production and consumer spending — are already showing signs of weakness, even as the labor market broadly holds up.

For the DAX, the immediate question is whether the combination of geopolitical easing and softer rate expectations can sustain the rally, or whether the weight of overbought conditions and mounting macro question marks finally prompts a bout of profit-taking. The record run has genuine support from strong individual performers, but the technical backdrop suggests the path ahead may be bumpier than the recent climb.