Germany's blue-chip DAX index reversed its earlier gains, closing 0.80% lower on Tuesday, as investor caution resurfaced following fresh US strikes on Iran and threats from Tehran.
Overnight US strikes on Iranian missile sites and mine-laying boats, which US Central Command said were launched in self-defense, have put renewed pressure on April's fragile ceasefire. The military action hit just hours after US President Donald Trump claimed negotiations to extend the truce and report the Strait of Hormuz were moving forward, and shortly before Iran's Supreme Leader Mojtaba Khamenei warned that "nations and lands of the region will no longer be a shield for American bases."
Danske Bank noted that Brent crude rebounded to $98.10 per barrel following the strikes, though it still trades lower than May 22's close of $103.50.
Closer to home, European Central Bank executive board member Isabel Schnabel told Reuters that the ECB will likely need to raise interest rates in June to address a "much more persistent" inflation shock. With eurozone inflation at 3% and projected to approach 4% by the end of 2026, Schnabel warned that "looking through" the shock is no longer an option. However, she noted the ECB remains "strictly data dependent" and will not pre-commit beyond the June meeting.
In Germany, export expectations further deteriorated in May as geopolitical uncertainty continues to cloud the industrial outlook, according to the ifo Institute. The ifo export expectations tumbled to -5.5 points from April's -1.2 points, with declines projected in foreign sales across the automotive, metal, and energy-intensive sectors.
On the corporate front, Fresenius Medical Care (FME.F) was down 0.88% after the German healthcare company announced plans to launch a new share buyback program worth 1 billion euros. The program will be executed in tranches over 12 months, starting in the "near future."
Meanwhile, mwb Research downgraded its rating on Infineon Technologies (IFX.F), noting the German semiconductor company's recent sharp rally created an "increasingly unfavorable setup" despite its solid strategic positioning and a strong operating environment. Infineon gained 1.07% at the end of the trading day.
"Infineon's fundamentals are clearly improving, with AI strength broadening into industrial recovery and early automotive stabilization, while order intake continues to move in the right direction. However, the stock has already captured this better backdrop: the broader chips trade has become crowded, valuations have rerated sharply, and further upside now depends on continued positive revisions and sustained multiple expansion," the research firm wrote. "With the stock materially above our revised EUR 60.00 price target, up from EUR 58.00, the risk-reward balance no longer supports a neutral stance. We therefore downgrade Infineon from HOLD to SELL."