The DAX index surged to a record high this month, a trend that may continue this week ahead as its biggest constituent publishes its financial results and as the European Central Bank (ECB) publishes its interest rate decision. It soared to a high of €21,500, up by over 80% from its lowest level in 2022. So, is the DAX 40 index a good investment this year?
SAP earnings ahead
SAP, the biggest company in the DAX index, has been a key contributor to its recent surge. Its stock has just surged to a record high of €263.55, up by over 240% from its lowest level in 2022. This rally has brought its market cap to over €336 billion.
SAP’s growth happened because of its strong market share in the Enterprise Resource Planning (ERP) industry, where it offers its solutions to global companies. It has also become one of the top firms in the artificial intelligence industry.
SAP stock price will be in the spotlight this year as the firm releases its fourth-quarter results. The most recent numbers revealed that its cloud business continued thriving, with the cloud backlog surging by 25% to €15.4 billion.
SAP’s cloud revenue rose by 25%, while the cloud ERP Suite revenue soaring by 34%. Its revenue soared by 9% to over €8.4 billion, while the operating profit rose by 29% to €2.2 billion.
Therefore, analysts anticipate that SAP’s growth will continue in the fourth quarter, with its annual revenue expected to be $33.95 billion and its forward guidance for 2025 being $37.9 billion. These results will show the impact of its recent acquisition of WalkMe.
Strong SAP results will likely push the stock to more upside this week, positively impacting the DAX index.
The index will also react to earnings by other global companies that have an outsize impact on global equities. Some of the most notable names are Microsoft, Apple, and Meta Platforms.
The best-performing DAX index companies the year so far are big names like BASF, Siemens, Deutsche Bank, Commerzbank, Rheinmetall, Heidelberg Materials, and Siemens Energy.
Most of these companies will release their quarterly results in the next few weeks.
ECB and Fed decisions
Monetary policy decisions will be the next catalyst for the DAX index. The Federal Reserve will be the first important catalyst, providing more catalysts for US and European markets.
Economists expect the Fed to leave interest rates unchanged in this meeting and maintain its hawkish tone. That’s because the US labor market has started to improve while inflation remains significantly high. A highly hawkish Fed will likely lead to more weakness in global stocks, including the DAX index.
The ECB, on the other hand, is expected to slash interest rates by 0.25%. However, unlike in its other meetings, the bank will likely embrace a hawkish view because European countries have started to recover.
DAX index forecast
The weekly chart shows that the DAX 40 index has been in a strong bull run, making it one of the top-performing European indices. It has moved above the 50-week moving average. Also, the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have continued rising this year.
Therefore, the path of the least resistance is higher, with the next point to watch being at €22,000.
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