Dax records a new maximum level - Dax achieves unprecedented peak in performance records.
The DAX, Germany's benchmark index, surged to a record high of 24,161 points on Tuesday, demonstrating a staggering 21% year-to-date growth. This impressive performance comes as the US stock markets remain in the red, drawing significant attention due to their imminent reopening following a holiday closure.
Analysts speculate that imminent gains in the US markets could reflect relief emerging after US President Donald Trump's decision to grant Europe a reprieve following his latest tariff threat. The focus, however, remains heavily on the ongoing conflict in Ukraine, as NATO countries hold discussions regarding an increase in military spending to five percent of the GDP.
Defense stocks, including Rheinmetall, a well-known German defense company listed in the DAX, witnessed a record rally. Rheinmetall's share price skyrocketed to as high as 1,883 euros early in the trading session, marking a dramatic tripling of its value since the Russian attack on Ukraine and defying the economic crisis in Germany.
The sturdy performance of Rheinmetall is underpinned by a combination of factors, including escalating geopolitical tensions and persistent demand for military modernization. European governments are bolstering defense budgets and rearming in response to the conflict in Ukraine. Rheinmetall's robust financial results, strong analyst endorsement, and insulation from potential US-China trade normalization also contribute to the company's success.
The planned state investment package in Germany, with the potential for debt-financed funding of up to 500 billion euros for infrastructure and climate protection, is further fueling investor confidence. However, experts caution against premature optimism, as it remains uncertain whether US-China trade will normalize.
The substantial rise in the stock market stands in stark contrast to the ongoing economic crisis in Germany. Investors tend to focus on future profits rather than the present situation, and the international orientation of the DAX's constituent companies means they generate the majority of their sales abroad.
European stock markets have risen more significantly than their US counterparts since the start of the year. This surge is driven by strong corporate earnings, the continued equity-friendly monetary policy of the European Central Bank (ECB), and relatively low valuations compared to US stocks. Additionally, expectations of lower interest rates in the eurozone are making stocks more attractive compared to fixed-income securities, supporting the economy overall.
- In light of the planned state investment package in Germany, there might be an increasing interest among investors to invest in real-estate, stock-market, and potentially finance-related sectors that contribute to infrastructure and climate protection.
- As the European Commission has also adopted a proposal for a Council regulation on the approximation of the laws of the Member States relating to the protection of the environment, there could be significant opportunities for investing in companies involved in environmental conservation and sustainable real-estate development.
