The German equity market demonstrated remarkable resilience this week, shrugging off renewed geopolitical trade tensions to lock in solid gains. Despite a negligible dip at Friday’s close, the DAX remains firmly positioned above the psychological 25,000 mark, driven by robust corporate earnings and improving domestic business sentiment that effectively overshadowed fears of rising US protectionism.

Bullish Momentum Meets Resistance

The 5-day performance chart paints a clear picture of buyer conviction. Opening the week near the 24,900 support zone, the index established a consistent upward channel, shrugging off early-week volatility to peak near 25,400 on Thursday. Although the week ended with a minor consolidation (-0.02% on Friday), the closing price of 25,284.26 keeps the index less than 1% away from its 52-week high of 25,507.79. This technical setup suggests that the current pause is likely a healthy accumulation phase rather than a reversal, as investors digest the rapid ascent from Monday’s lows.

Sector Divergence: Defensive Plays Lead

Under the hood, the rally was not uniform, revealing a strategic rotation among investors. The week belonged to defensive and value-oriented sectors, with Deutsche Telekom and Scout24 posting significant gains following strong earnings reports, acting as heavyweights that lifted the broader index. In contrast, growth and consumer discretionary stocks faced headwinds; companies like Delivery Hero and Puma struggled amidst earnings misses and broader “AI anxiety” that has dampened sentiment in the tech sector. This divergence indicates a market that is becoming increasingly selective, rewarding fundamental strength over speculative growth.

Macro Backdrop: Domestic Optimism vs. Global Trade Fears

The macroeconomic narrative this week was defined by a tug-of-war between external threats and internal resilience. While the Trump administration’s threat of new 15% tariffs initially rattled European markets, the anxiety was counterbalanced by positive domestic data. The Ifo Business Climate Index rose to 88.6, its highest level since mid-2025, signaling that German exporters are feeling more optimistic despite the protectionist rhetoric from Washington. Furthermore, the European Central Bank (ECB)’s steady hand on interest rates continues to provide a stable floor for risk assets, allowing the DAX to decouple somewhat from the volatility seen in US markets.

Looking ahead to next week, the primary focus will be whether the DAX can summon the volume to decisively breach the 25,500 resistance level. Traders should closely monitor upcoming updates on US-EU trade negotiations, as any de-escalation in tariff rhetoric could provide the catalyst needed for a breakout to fresh all-time highs. Conversely, continued weakness in the tech sector or a breakdown in trade talks could see the index retest support at 25,000. Investors would be wise to maintain a balanced exposure, favoring sectors with strong cash flows until the geopolitical dust settles.