Markets show a slight uptick as investors respond to recently released earnings reports
German Stocks Rally Despite Disappointing Factory Orders and Trade Tensions
German stocks are gaining ground in positive territory on Wednesday, buoyed by optimism about the country's longer-term economic prospects. Despite a surprise decline in factory orders in June and threats of U.S. tariffs, the benchmark DAX is up 48.81 points or 0.2% at 23,906.00.
Several major German companies are also performing well. BMW, Daimler Truck Holding, Mercedes-Benz, BASF, Volkswagen, and Porsche Automobil Holding are up 1 to 1.4%. Porsche is up nearly 3%, while Zalando is down nearly 6%, despite delivering "strong" growth in sales and profits during the second quarter and raising its 2025 guidance. Vonovia is up 2.7%, despite paring some early gains, due to an 11% growth in first-half earnings.
However, not all companies are faring well. Fresenius Medical Care is down 2.3%, while Bayer is down by about 4.7%. Beiersdorf is tanking more than 10%, due to a cut in full-year guidance and weaker-than-expected sales for its core Nivea brand. Infineon Technologies is down 2.4%. Qiagen, Adidas, Merck, and Siemens Energy are down 0.8 to 1.4%.
The decline in factory orders in June was unexpected, with new orders falling 1% month-on-month. When large-scale orders are excluded, new orders were 0.5% higher than in the previous month. Orders from outside the euro area plunged 7.8% in June. Domestic orders grew 2.2% in June.
Despite these challenges, investors remain optimistic about Germany's economic future. The DAX and MDAX have posted gains year-to-date (around 20%) supported by government initiatives such as the constitutional debt brake reform unlocking public investment and the "Made for Germany" private sector commitment program, which aims to mobilize €630 billion by 2028. These fiscal and structural policies are seen as mitigating the near-term impacts of weak factory orders and trade tensions.
The positive stock market performance contrasts with deteriorating economic sentiment and disappointing second-quarter growth in Germany. Market participants are focusing on future earnings and structural strengths rather than short-term data or political threats such as U.S. tariffs on pharmaceuticals and chips. Although the EU-US trade deal disappointed some experts and the factory orders data is weak, the market discounts these challenges in light of fiscal stimulus and robust corporate earnings projections.
In summary, German equities are rallying because investors are pricing in the supportive effects of government spending, structural reforms, and expected above-average corporate earnings growth, offsetting concerns from trade conflicts and disappointing economic indicators. Despite typical historical seasonal weakness in August, the market remains bullish on Germany's long-term prospects. Heidelberg Materials is up 1.7%, while Orders from outside the euro area plunged 7.8% in June.
Investors are focusing on the future earnings and structural strengths of German companies, leading to a rally in the stock market, despite challenges like disappointing factory orders and trade tensions. Several major German companies are performing well in this context, including BMW, Daimler Truck Holding, Mercedes-Benz, BASF, Volkswagen, Porsche Automobil Holding, and Vonovia, among others.
Investors are optimistic about Germany's economic future, as they believe government initiatives such as the constitutional debt brake reform and the "Made for Germany" program will stimulate growth and offset the near-term impacts of weak factory orders and trade tensions. This optimism is also supported by the expected above-average corporate earnings growth in the country.
