Dax achieves a new peak in recordings - Dax achieves new all-time peak
German Stock Market Surges: DAX Hits All-Time High
Tuesday saw the DAX, Germany's benchmark index, reach a new record high of 24,161 points. Despite the continuing uncertainties, this index has grown around 21% this year, with US markets experiencing a decline.
As the US stock markets were closed on Monday due to a national holiday, investors eagerly anticipate their reopening. Indications point to gains in New York, reflecting relief following US President Donald Trump's decision to grant Europe a reprieve in light of his latest tariff threat.
Defense stocks also reached unprecedented levels, despite the ongoing lack of resolution in the Ukraine conflict. While NATO countries discuss raising defense spending to five percent of GDP, the momentum in defense stocks remains strong. German Chancellor Friedrich Merz (CDU) announced the abolition of restrictions on using German weapons against Russian territory.
The three prominent German defense stocks in the DAX and MDAX - Rheinmetall, Renk, and Hensoldt - continued their strong performance with record highs. Rheinmetall shares were traded at up to 1,883 euros in early trading. They have more than tripled since the beginning of the year, building on the rally that started with the Russian attack on the neighboring country in 2022. This means they are already more than 20 times their original value.
Plans for a massive debt package are also stirring optimism among market players in Germany. A debt-funded fund of up to 500 billion euros is set to be provided for infrastructure and climate protection.
Analysts attribute the recent stock market boom to a blend of easing geopolitical tensions, strong quarterly reports, and easing inflation data. In Germany, the proposed state investment package is also boosting sentiment among traders.
Although trade tensions between the US and China, the world's two largest economies, have been affecting financial markets for weeks, concerns about a global recession have eased. However, experts caution against premature optimism, as it remains uncertain whether trade between the US and China will normalize.
The rise in stock markets contrasts sharply with Germany's current economic crisis. Investors often focus on future profits rather than the present situation, and the 40 companies listed in the DAX are internationally oriented, generating the majority of their sales abroad.
In Europe, stocks have increased significantly more than in the US since the beginning of the year, thanks to strong corporate earnings, the continued equity-friendly monetary policy of the European Central Bank (ECB), and relatively low valuations compared to US stocks.
The stock market is also driven by expectations of lower interest rates in the Eurozone, which the ECB aims to use to boost the weak economy. Inflation concerns have eased recently, and many economists expect lower interest rates in the coming months.
For equity investors, the prospect of lower interest rates is a positive development. Stocks become more attractive compared to fixed-income securities. Loans become cheaper, making it easier for companies to secure financing and for homeowners to obtain loans. Overall, investments become more affordable, supporting the economy.
Enrichment Data:- Defense stocks, such as Rheinmetall, have reached record highs in the German DAX due to several factors: increased demand for defense equipment, EU defense spending initiatives, NATO's defense expenditure targets, geopolitical tensions, and the easing of trade tensions between the US and EU.- The conflict in Ukraine has led to heightened demand for defense equipment across Europe and beyond, driving up the shares of defense companies like Rheinmetall, Renk, and Hensoldt.- The European Union has approved a €150 billion loan program to enhance defense capabilities in response to the Ukraine crisis. This initiative aims to boost defense spending and has contributed to the rally in defense stocks.- NATO members are expected to increase their defense expenditure to 5% of their economic output, further driving demand for defense equipment, benefiting companies like Rheinmetall.- As long as tensions in Ukraine persist, defense stocks are likely to continue their upward trend.
The Commission has also adopted a proposal for a Council regulation, aiming to align the Member States' financial structures with environmental protection initiatives, potentially attracting investing opportunities in stock-market listed companies that focus on eco-friendly technologies.
With geopolitical tensions easing and European defense stocks, such as Rheinmetall, reaching record highs, there appears to be a growing interest in funding defense initiatives and sustainable technologies, offering a lucrative avenue for finance investments.
