Arms and Dax Reach Impressive Peak Levels
The DAX and defense stocks ascended to new record highs on Wednesday, with Rheinmetall leading the charge. The military equipment manufacturer touched a peak of 1,936 euros, marking a staggering 212% year-to-date gain. Despite a minimal 0.5% increase in trading, the stock is eyeing the next major milestone of 2,000 euros. Analysts at Swiss bank UBS have boosted their price target for Rheinmetall from €1,840 to €2,200, reflecting their confidence in the company's financial might and its role in the defense sector.
Rheinmetall's ascent propelled the DAX to an all-time high of 24,325.97 points before a retracement. However, the index, generally deemed overbought, closed the day with a 0.8% decline to 24,038 points. The Euro Stoxx 50, the blue-chip index of the Eurozone, mirrored the DAX with a 0.7% dip to 5,380 points.
Aroundtown, a commercial real estate specialist, was among the day's gainers, surging 3.4% to 2.78 euros. The upward trend was fueled by increased rents in the first quarter, despite no dividend expectation for 2024. The sector witnessed a minor blow as Standard & Poor's downgraded Aroundtown's rating recently.
The U.S. dollar fluctuated minimally on the foreign exchange market. The dollar index, which measures the U.S. currency against its six major trading partners, witnessed a 0.2% rise. The euro depreciated slightly by 0.1% to 1.1316 dollars.
The Japanese yen demonstrated some weakness, dipping 0.2% to 144.60 per dollar after losing around 1% the previous day. The Japanese finance ministry is contemplating adjusting plans for the issuance of ultra-long bonds in response to the recent rise in yields, according to Reuters.
Demand was subdued at the auction of 40-year Japanese government bonds (JGBs) on Tuesday. Approximately $3.46 billion worth of bonds were sold, with a bid-to-cover ratio of 2.21, the lowest since July last year compared to the historical average. This led the yield on 40-year JGBs to hit a record high of 3.675%, but it receded to 3.34% on Wednesday. The yield on 10-year JGBs fell by 3 basis points (bps) to 1.5%, while 30-year bonds yielded 2.887%, 10 bps less than the previous day.
Brent Crude oil prices ascended by 1.4% to $64.98 per barrel. The rise was attributed to countervailing developments such as the non-renewal of Chevron's Venezuela export permit and potential energy sector sanctions against Russia, coupled with reports of a planned OPEC+ production increase in July. Eight OPEC+ countries that had surpassed their quotas plan to boost production by 411,000 barrels per day (bpd).
The financial sector witnessed a significant event as analysts at Swiss bank UBS increased their price target for Rheinmetall, a defense stock, from €1,840 to €2,200, indicating their confidence in the company's financial might. Moreover, the ascend of Rheinmetall led the DAX, a major German stock index, to touch an all-time high, underscoring the interconnectedness of the finance, industry, and energy sectors.
