The DAX index surged to a record high at the start of the trading week, closing at 24,868 points – a 1.3% increase compared to the previous day. The gains were notably driven by shares in Rheinmetall, Infineon and Siemens Energy, while automotive giants Volkswagen, BMW and Mercedes-Benz experienced losses.
This unprecedented climb, coupled with a relatively swift dismissal of market anxieties following a recent U.S. intervention in Venezuela, highlights a troubling disconnect between geopolitical realities and investor sentiment. Christine Romar, Head of Europe at CMC Markets, observed that markets appear increasingly willing to compartmentalize regional conflicts, prioritizing anticipated economic benefits over ethical considerations. “As long as military conflicts remain regionally contained and don’t trigger escalations between global powers, the market, however callous it may sound, can live with it” she stated, noting the rapid rebound in trading after initial weekend declines.
The perception that Venezuela, potentially under U.S. influence, might increase oil supply and lower prices appears to have outweighed any immediate moral or political concerns. This “right of the stronger” dynamic, where power supersedes morality, is, according to Romar, now deeply ingrained in market behavior. The bullish momentum was further amplified by positive performance on international stock exchanges, propelling the DAX to its record-breaking start to the year.
While analysts predict a potential climb to 25,000 points should the upward trend continue, a critical caveat remains: the underlying health of the German economy. Romar cautioned that without a significant improvement in economic performance, the DAX’s impressive gains risk being unsustainable and subject to a rapid correction. Recent economic indicators, she emphasized, paint a decidedly unencouraging picture.
Elsewhere, the euro strengthened slightly to $1.1716, while gold prices saw a significant spike, reaching $4,444 per fine ounce – a 2.6% increase. The price of Brent crude oil also rose considerably, nearing $61.57 per barrel. This escalation in commodity prices, coupled with the DAX’s record performance, raises questions about the long-term resilience of the market and its vulnerability to shifting geopolitical and economic landscapes. The disconnect between the euphoria on the stock exchange and the potentially precarious economic foundation warrants close scrutiny, particularly considering the increasing normalization of politically motivated market adjustments.
