DAX at 1-Week Low

The DAX 40 fell 0.5% to around 25,870 on Wednesday, the lowest level in a week, mirroring a negative sentiment across Europe. The conflict between the US and Iran over control of the Strait of Hormuz has escalated further, pushing oil prices even higher and fuelling concerns over inflation and interest rates. The US military said it destroyed five Iranian crude oil tankers and sank one of them in retaliation for Tehran's attack on a US warship. Meanwhile, the ECB is widely expected to raise rates by 25 bps tomorrow, with further hikes possible before year-end. Energy-intensive industrials and banks were among the hardest hit. Rheinmetall slipped 3%, making it the worst performer, reversing the gains of the prior day. Beiersdorf dropped nearly 2% after Deutsche Bank downgraded the stock from “Hold” to “Sell.” Deutsche Börse declined 1.7% as investors reacted to its plans to issue a €600 million convertible bond to finance general corporate purposes and liabilities.

The DAX Index is dropping 107 points. Leading the losses are Rheinmetall (-3.16%), Deutsche Boerse (-2.00%) and Beiersdorf (-1.65%). Top gainers were SAP (1.86%), RWE (1.65%) and E.ON (1.50%).

The DAX 40 pared some early losses to close virtually unchanged at 26,008 on Tuesday, as caution prevailed across European markets. Soaring oil prices and heightened tensions in the Middle East rekindled inflation concerns ahead of monetary policy decisions from major central banks. The ECB is expected to raise borrowing costs by another 25 basis points to 2.5% on Thursday, which would mark the second rate hike this year, while markets anticipate a similar move from the Fed next week. Gains in pharmaceutical stocks, industrials and autos were partly offset by weakness in the technology sector and insurers. Fresenius SE & Co surged 3.2%, leading gains after UBS reiterated its positive outlook on the stock with a Buy rating. Defense stocks such as Rheinmetall also strengthened, rising nearly 3%, supported by favorable analyst commentary. Volkswagen and BMW advanced 2.1% and 1.4%, respectively. On the flipside, Infineon Technologies dropped 3.7% following a downgrade by Morgan Stanley.