The German benchmark index, the DAX, edged slightly higher on Thursday, closing at 25,127 points, a marginal gain reflecting a complex interplay of emerging economic data and ongoing investor sentiment. The session witnessed a volatile performance, initially opening positively before dipping into negative territory mid-morning, ultimately recovering in the afternoon trading session.
Driving the cautiously optimistic outlook is the unexpectedly robust surge in industrial order intake, a development that has reignited hopes for a much-anticipated German economic upturn. Christine Romar, Head of Europe at CMC Markets, noted, “The patience of investors regarding the highly awaited defense and infrastructure package, alongside fiscal incentives from the German government, may finally be yielding results”. November’s order intake figures, rising for the third consecutive month with a significant 5.9% increase, represent a near 10% three-month surge – a trend that some are characterizing as a burgeoning boom.
Crucially, this newfound demand is originating domestically, a significant shift from previous patterns reliant on external markets. Romar highlighted the burgeoning demand for defense-related goods alongside products and large-scale projects within the metalworking and technology sectors. This domestic-driven growth, if sustained, could potentially deliver a surprising positive performance for the German economy this year, potentially validating the lofty expectations already embedded within the DAX’s valuation. The burgeoning discrepancy between the index’s record-high valuation – exceeding 25,000 points – and actual economic performance could, therefore, begin to narrow, alleviating concerns about overvaluation.
Within the DAX, Deutsche Telekom, Adidas and Bayer led the gains during Thursday’s trading, while Infineon and Siemens Energy lagged behind, demonstrating a divergence in performance potentially reflective of varying sectoral perspectives.
Adding further complexity, the price of natural gas exhibited a downward trend. February delivery contracts dropped to €28 per megawatt-hour (MWh), a 4% decrease from the previous day. This translates to a potential consumer price of approximately 7 to 9 cents per kilowatt-hour (kWh), a welcome development for households facing high energy costs, contingent on price stability.
Conversely, oil prices experienced a notable increase. Brent crude, a key benchmark, reached $61.19 per barrel, marking a 2.1% rise compared to the previous trading day’s close. This fluctuation underscores the ongoing volatility in global energy markets and the potential for inflationary pressures.
The euro also weakened against the dollar, trading at $1.1653, reflecting broader macroeconomic factors impacting the currency’s value. The market’s reactions and future performance will likely be intensely scrutinized as policymakers grapple with the interplay of domestic demand, international economic headwinds and the efficacy of government stimulus measures.
