The German stock market demonstrated remarkable resilience this week, overcoming a three-day slide to finish on a high note. The benchmark DAX index climbed 230.40 points on Friday, closing at 24,721.46, just shy of its recent record highs. Despite mid-week volatility driven by global growth concerns and profit-taking, investors returned to equities ahead of the weekend, buoyed by solid corporate earnings and easing fears regarding AI capital expenditure.

Volatility and Recovery: A V-Shaped Week

The trading week was defined by a distinct “V-shaped” recovery, as visible in the 5-day performance chart. After starting the week on stable footing, the index faced significant selling pressure between Tuesday and Thursday, dipping to lows around the 24,250 level. This mid-week slump was driven by a broader European tech rout and anxiety over US labor market data. However, Friday’s trading session marked a decisive turnaround. The 0.94% daily surge indicates strong technical support at the 24,200 level, suggesting that the long-term bullish trend remains intact despite short-term jitters.

Earnings Drivers: Energy and Defense Outperform

Corporate performance was the primary catalyst for Friday’s rally. Siemens Energy was a standout performer, surging approximately 4% after positive read-across from US peer Bloom Energy and solid quarterly results, reinforcing confidence in the energy transition sector. Heidelberg Materials also posted strong gains (+2.6%) following upbeat financial figures.

In the pharmaceutical space, Bayer added 2.2% after announcing successful research results for its drug Asundexian, providing a much-needed boost to investor sentiment. The defense sector continued its robust run, with Renk jumping over 6% following rating upgrades from major brokers. Conversely, the automotive sector weighed on the index; negative news from Stellantis dragged down German heavyweights like Volkswagen, BMW, and Daimler Truck, which all saw declines of over 1%. Siemens Healthineers also underperformed, dropping nearly 3% on earnings disappointment.

Macro Backdrop: Elections and AI Sentiment

Broader market sentiment was aided by a stabilization in the global technology sector. Strong earnings from US data analytics firm Palantir helped calm fears that the AI spending boom might be slowing, which had previously pressured global indices. Domestically, investors appear largely unfazed by the upcoming German federal election scheduled for February 23, 2026. While political uncertainty typically breeds volatility, the market’s focus remains squarely on corporate fundamentals and the European Central Bank’s monetary policy path, with expectations of stable rates providing a floor for equity valuations.

Looking ahead to next week, volatility may persist as the countdown to the federal election intensifies. Investors should closely monitor the upcoming US inflation data, which could influence global liquidity flows, as well as the next batch of earnings from major German financial institutions like Commerzbank. Technically, the DAX needs to break and hold above the 24,800 resistance level to challenge the all-time high of 25,507. A failure to sustain Friday’s momentum could see the index retest the week’s lows near 24,250.