DAX's Rally Potential Amid Postponed EU Tariffs and Shifting Trade Dynamics

The U.S. decision to postpone tariffs on EU exports until July 9, 2025, has unleashed a surge in European equities, with the DAX index hitting record highs amid easing trade tensions. This delay, coupled with strategic corporate restructuring and a strengthening euro, has created a rare convergence of technical and fundamental catalysts for investors. Now is the time to position in export-heavy sectors, particularly in companies like ThyssenKrupp, where short-term pain could soon give way to long-term gains. But with risks lurking in trade policy and central bank actions, the window to act is narrowing.

The Tariff Delay: A Catalyst for DAX's Technical Breakout

The U.S.-EU tariff truce has injected optimism into markets, lifting the DAX to an all-time high of 23,499.3 points in mid-May. This rally reflects not just sentiment but also technical momentum. The index has broken above resistance at the 23,000 level, a key psychological threshold, with volume confirming institutional buying.

The chart shows a clear upward trajectory, with the 50-day moving average now acting as support. A breakout above 23,500 could trigger a sprint toward 24,000—a 2.5% upside—before facing resistance from 2023 highs.

Fundamental Tailwinds: Export Sectors Lead the Charge

The DAX's strength is underpinned by sector-specific resilience. Companies exposed to global trade, such as automotive and industrial giants, have seen earnings hold up despite macroeconomic headwinds. Key examples:
- Commerzbank reported a 12% year-on-year profit jump to €834 million in Q1 2025, driven by strong corporate lending.
- Siemens Energy and BMW climbed 3% and 1.6%, respectively, as supply chains stabilized post-tariff uncertainty.

The EU's €95 billion countermeasures, delayed until July, have bought time for firms to adjust trade routes and negotiate exemptions. This breathing room is critical for exporters like ThyssenKrupp, which faces a confluence of risks and rewards.

ThyssenKrupp: A Sector-Specific Play with Hidden Strength

ThyssenKrupp's stock has been a rollercoaster in May, falling 15% over 10 days to €8.63, but its fundamentals tell a different story.

• Balance Sheet Fortitude: With €4.0 billion in net cash and €7.1 billion in liquidity, the company can weather tariff volatility while pursuing strategic initiatives.
• Green Transition Leadership: Its Decarbon Technologies division posted a 34% EBIT jump in Q2, fueled by green hydrogen projects. A pipeline of 150+ projects, including a 300 MW electrolyzer in Spain, positions it to capitalize on the EU's €957 billion green investment push.
• Technical Oversold Signal: The RSI14 of 24 suggests shares are deeply undervalued. A rebound toward support at €8.41 could unlock a short-covering rally.

Risks: ECB Policy and Lingering Trade Uncertainty

The rally isn't without pitfalls. The ECB's hawkish stance—despite inflation cooling—remains a threat. A rate hike in Q3 could dampen growth, while the euro's strength (up 5% YTD vs USD) could crimp competitiveness.

Meanwhile, the July 9 tariff deadline looms. If talks fail, the EU's €21 billion in countermeasures—including tariffs on U.S. autos and spirits—could reignite volatility. Investors must monitor trade negotiations closely.

Why Act Now?

The DAX's technical setup, the tariff delay's tailwind, and ThyssenKrupp's restructuring offer a compelling risk/reward trade. Here's the playbook:
1. Buy DAX ETFs (EWG) for broad exposure, targeting the 24,000 level.
2. Add ThyssenKrupp shares at €8.60, with a stop-loss below €8.20.
3. Hedge with EUR/USD futures to offset currency risk if the euro weakens.

Conclusion: The Clock is Ticking

The DAX's rally is no fluke—it's a calculated move fueled by policy relief and corporate adaptation. With the ECB's next meeting in July and trade talks climaxing, the next two months will test the resilience of European equities. For investors willing to bet on a resolution to trade wars and a green industrial revival, now is the moment to strike.

The convergence of strong fundamentals, technical momentum, and strategic corporate pivots makes this a rare opportunity. Don't let uncertainty deter you—act before the window closes.

The views expressed are for informational purposes only and should not be considered investment advice.