The German stock market experienced a positive shift on Thursday, with the DAX index closing at 23,882 points, marking a 0.8% increase from the previous day’s close. The gains are being attributed, at least in part, to growing speculation surrounding potential reversals in environmental regulations impacting the automotive sector, a cornerstone of the German economy.
Christine Romar, Head of Europe at CMC Markets, characterized the move as a sign that “the deep valley of transformation problems, profit warnings and restructuring programs” may be slowly being navigated. Central to the optimism is the possibility that the European Union’s planned ban on internal combustion engine vehicles from 2035 could be reconsidered in Brussels. Simultaneously, the prospect of a rollback of environmental regulations on vehicles sold in the United States, potentially spearheaded by a renewed Trump administration, has fuelled further investor confidence. This creates a complex geopolitical dynamic, potentially undermining the EU’s climate objectives while benefitting German automakers seeking to avoid costly transitions.
Shares of Daimler Truck, Porsche and Mercedes-Benz led the upward trajectory throughout the trading day. Conversely, Bayer, Scout24 and BASF experienced declines. It’s worth noting that this uneven performance highlights the varied exposures within the German industrial landscape, reflecting the uneven impact of broader economic and regulatory shifts.
A further development influencing the market was the decrease in natural gas prices, falling to €27 per megawatt-hour, representing a 4% drop from the previous day – potentially translating to consumer electricity prices of around 7 to 9 cents per kilowatt-hour if this level proves sustained. This decline offers a mitigating factor against inflationary pressures, but raises questions about Europe’s reliance on non-renewable resources and the long-term viability of current energy transition strategies.
Despite the positive trends in gas prices, the price of Brent crude oil rose to $63.24 a barrel, a 0.9% increase, demonstrating the volatility inherent in global energy markets and underscoring the ongoing geopolitical factors influencing oil supply.
The Euro also weakened slightly against the US dollar, trading at $1.1657. This currency fluctuation adds another layer of complexity to the German economic picture, potentially impacting export competitiveness and further influencing the performance of export-oriented industries.
