Europe's Mid-Session Bell: Sentiment improves as markets brace for US-China trade talks, DAX eyes fresh highs

Stocks jumped in Japan and Taiwan on Friday as a U.S. trade deal with Britain boosted hopes for progress in tariff talks with other nations.

On Thursday, U.S. President Donald Trump said tariffs on Beijing, currently at 145%, will probably be reduced as the two top world economies prepare for talks in Switzerland. The comments have fueled hopes that a trade war between the two nations would be avoided and continues to aid sentiment.

As a result European shares ticked higher this morning with the pan-European STOXX 600 index rising 0.3% with all regional markets up, led by a 0.5% rise in Germany's DAX index.

US futures were in the red for a brief while during the Asian session but the S&P 500 was flat at the time of writing.

On the FX front, the dollar headed for a weekly gain on most major currencies on Friday with the DXY having broken above the psychological 100.00 mark.

The euro hit a one-month low of 1.1197 overnight and was down 0.6% for the week but later rose 0.2% to 1.2253. The yen, often seen as a measure of investor confidence, weakened 0.4% this week, dropping to a one-month low of 146.18 per dollar before strengthening to 145.195, pushing the dollar down 0.5% on the day.

The pound had initially climbed on reports of a potential U.S.-UK trade deal but lost those gains when the deal turned out to be limited, hitting a three-week low of 1.3220 during early trading on Friday.

Currency Strength Chart, Strongest - Weakest: JPY, CHF, EUR, USD, AUD, CAD, GBP, NZD

Oil prices were up on Friday, after rising about 3% in the previous session as markets await US-China trade talks this weekend. Brent crude rose 43 cents (0.68%) to 63.27 per barrel, while U.S. West Texas Intermediate crude went up 42 cents (0.7%) to 60.33 per barrel. On Thursday, both ended the day almost 3% higher.

Gold continues to swing back and forth as sentiment shifts with a foray lower toward $3275/oz in the Asian before recovering to trade around the $3320/oz mark at the time of writing. Gold is still on course for a weekly gain with a drop of around $80 needed for a bearish weekly close.

Overall sentiment has improved this week with market participants heading into the weekend looking toward trade negotiations between Washington and Beijing due to begin on Saturday in Switzerland. Depending on how the talks develop, markets could open with gaps after the weekend.

From a data standpoint, China's exports grew more than expected in April, and imports fell less sharply, according to customs data on Friday, offering some relief to Beijing before key tariff talks.

Looking to the European session and a quiet morning is expected with a speech by BoE Governor Bailey the only highlight. We also have a host of Federal Reserve policymakers speaking throughout today.

From a technical standpoint, the DAX index is now at a confluence area where the previous drop in price began.

This is a crucial test for bulls as the DAX needs to record a daily candle close above the 23471 handle for a move higher to materialize.

As i mentioned previously, there is no historic price action to monitor and thus i will be focused on psychological levels such as the 23750, 24000 and 24250 respectively.

There is a chance that markets may open with gaps after the weekend depending on how trade talks shake out over the weekend.

Positive news could be the catalyst the DAX needs to break higher.

Immediate support rests at 23212 and 28900 before the 22405 handle comes into focus.

DAX Daily Chart, May 9, 2025

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