FRANKFURT (dpa-AFX) - The Dax was able to build on its recent gains in the new week. "The traffic lights are pointing to green, investors are switching to risk-on mode," wrote analyst Claudia Windt of Landesbank Hessen-Thüringen (Helaba). Dwindling inflation worries and the associated new hopes of interest rate cuts as well as diminishing political uncertainties are contributing to this.

In this respect, the leading German index was able to move a little closer to its record high of just under 18,893 points reached in May, thus exiting its recent downward trend. However, one driver of the recent rally will be put to the test on Sunday. If, contrary to expectations, Marine Le Pen's right-wing nationalist Rassemblement National (RN) wins an absolute majority in the second round of the French parliamentary elections, the resulting political uncertainties are likely to cause turbulence on the stock markets.

The latest polls do not point in this direction. However, Helaba expert Windt pointed out that only 75 of the 577 seats in the National Assembly have been allocated. Both President Emmanuel Macron's bloc and the left have withdrawn a number of candidates in order to prevent the RN from gaining an absolute majority. However, there is also likely to be renewed uncertainty on the financial markets if the left-wing bloc were to win as a surprise.

At least, however, the traffic light government in Germany finally agreed on a budget for 2025 shortly before the summer break, which should both comply with the debt brake and include a "growth turbo", Windt emphasized positively. In view of the latest German production figures from May, it would be a good thing if this were to kick in soon. After all, both production and order development were disappointing. "Another piece of bad news from the industry," commented economist Jens-Oliver Niklasch from Landesbank Baden-Württemberg. "It seems that a turn for the better is further away than ever."

Another key driver for the stock markets is the prospect of key interest rates in the USA falling sooner rather than later. Linked to this is the hope of economic stimulus for the global economy through falling financing costs for companies and consumers. However, the US inflation figures for June, which are due on Thursday, must not be a significant negative disappointment.

The inflation data from the US will be a key factor influencing the Fed's interest rate decision, wrote Edgar Walk, chief economist at asset manager Metzler Asset Management. The data situation is currently ambiguous. From January to April, inflation tended to surprise with high values, which triggered concerns about persistently high inflation. In May, however, the rise in prices slowed considerably.

"If inflation also showed weak momentum in June, nothing stands in the way of a key interest rate cut in September. Perhaps July could even come back into play," Walk summarized. Labour market data from the USA for the month of June published on Friday, which at least did not fuel any new inflation concerns, fit into this picture.

Robert Halver, Head of Capital Market Analysis at Baader Bank, is also rather optimistic about the new week. The often observed summer blues on the stock market are likely to be limited this time. Instead, the familiar pattern is likely to continue for the time being, whereby upward breakouts are slowed down by profit-taking, but price slumps are seen as opportunities to enter the market.

Even in the typically low-turnover summer period, this suggests at least a volatile sideways movement, continued Halver. On the one hand, negative aspects such as the bumpy global economy or the political uncertainty in France are known or seen as manageable. And on the other hand, "improved economic prospects and the materializing fantasy of interest rate cuts are creating a safety net against price slumps." After all, unlike the Fed, the European Central Bank has already completed a turnaround in monetary policy and cut its key interest rates again in June for the first time in almost five years.

Otherwise, investors are likely to look to New York on Friday. This is when major US banks present their business figures for the second quarter, kicking off the reporting season in the USA. Here in Germany, the start is slow. The Südzucker Group and packaging manufacturer Gerresheimer will be in the spotlight on Thursday with their quarterly reports./la/bek

--- By Lutz Alexander, dpa-AFX ---