The Dax index opened the trading day on Wednesday in positive territory. By 9:30 AM, the leading index was calculated at approximately 24,300 points, representing a 0.4 percent increase from the previous day’s closing level. Deutsche Bank, Rheinmetall and RWE led the performance list, while Adidas, Infineon and Volkswagen ended among the top gainers.
According to Jochen Stanzl, Chief Market Analyst at CMC Markets, “Purchasers in the Dax are exhibiting activity at an atypical time this year, meaning the index is now only just over one percent away from its record high”. He further noted that seasonal trends would typically indicate weaker market performance at this point. A continuing shift of capital from the United States to Europe and Germany is cited as a key driver, with investors seeking to avoid the uncertainty surrounding US trade policy. The ongoing trade disputes, exemplified by the newly proposed 50-percent import tariff on copper, continue to pose a significant risk for the US economy.
Stanzl commented that the German economy is mitigating some of these uncertainties, drawing support from both intra-European economic activity and a potential economic recovery in East Asia. He suggests that Germany may be able to avert a recession this year and return to growth in the coming year. “The Dax is already anticipating this development, as investors consistently look three to six months into the future.
The Dax currently trades at a price-to-earnings ratio (P/E ratio) of approximately 16. While this places the index at the higher end of its historical range since the mid-2000s (between 8 and 16), it remains within the lower range of the preceding two decades (between 16 and 33). Stanzl advises that new investors would need to anticipate a fundamental revaluation of German equities to justify entering the market at the current valuation.
The Euro was modestly stronger on Wednesday morning, trading at $1.1725, with the dollar correspondingly valued at €0.8529.
Meanwhile, oil prices remained almost unchanged; a barrel of North Sea Brent crude was priced at $70.12 around 9:00 AM German time, a decrease of 3 cents from the close of the previous trading day.
