The German DAX index opened higher on Monday, buoyed by positive sentiment surrounding a recently agreed trade arrangement between the United States and the European Union. Shortly after 9:30 AM local time, the benchmark index was calculated at approximately 24,360 points, representing a 0.6% increase from Friday’s closing level.
Leading the gains were shares in Sartorius, Merck and Porsche, while Rheinmetall, Siemens Energy and Eon experienced downward pressure.
Investor reaction was driven largely by the outcome of the tariff agreement, averting the previously feared imposition of a 30% tariff. According to Thomas Altmann of QC Partners, “The agreement prevents the feared 30% tariff from taking effect. While this allows the US market to remain accessible, it also grants the US a 15% tariff on European goods, representing a potential constraint on sales volumes and profit margins.
Altmann emphasized that the trade agreement provides much-needed planning certainty for European businesses. However, he cautioned that the deal ultimately appears more advantageous for the United States than for the EU. He further noted that celebrating the reduction from a potential 30% tariff should be tempered by the fact that average tariffs on German products prior to the Trump era were significantly lower, averaging around 1%. Despite this agreement, the trend towards genuine free trade appears to be receding.
European stock markets broadly responded favorably to the trade development, albeit with a measured reaction. The agreement was largely within anticipated parameters and reflects a similar pattern to the recent trade deal established between the US and Japan.
The Euro weakened somewhat against the US Dollar, trading at $1.1718, with a US Dollar equivalent of €0.8534.
Meanwhile, oil prices saw an increase, with a barrel of Brent crude reaching $68.90 at approximately 9:00 AM local time – a 46-cent rise representing a 0.7% gain compared to the previous day’s close.
