"DAX Smashes Records Five Weeks After Tariff Shock"
Customs surprise sparks five-week streak for Dax, surpassing previous record
The German DAX index is on a roll, Breaking records and closing at around 23,543 points on Friday, marking a 0.63% increase. Claudia Windt of Landesbank Hessen-Thüringen commented, "The stock market lights are still shining bright." Investors appear to be hopping aboard this rally, determined not to miss out.
Recall the early April slump, when the DAX plummeted to nearly 18,490 points due to Donald Trump's announcement of hefty tariffs and China's subsequent countermeasures. Since then, the index has experienced a powerful recovery, gaining more than 25% – an impressive 18% year-to-date.
Meanwhile, the MDax, representing medium-sized German companies, also inched up 0.60%, reaching 29,730.13 points. However, it's yet to regain its 2021 record high.
This market surge stems from a sense of optimism surrounding US President Trump's deal-making prowess. On Thursday, he reported a preliminary agreement in the US-UK trade dispute. hoped-for discussions between the US and China are slated for the weekend.
Underlying factors driving this DAX rally include:
- De-escalating Trade Tensions: Trump's softer stance in trade policy has eased investor apprehension, boosting overall market sentiment[1][4].
- Strong Economic Data and Fiscal Reforms: Favorable German economic figures, coupled with the new government's pro-growth fiscal reforms, have enhanced investor confidence[1][4].
- Anticipated ECB Rate Cuts: Deeper anticipated rate cuts by the European Central Bank suggest increased monetary easing, which is beneficial for European equities[1][4].
- Relatively Attractive Valuation: The DAX's premium over similar European indices reaches a high not seen since 2009, indicative of strong investor interest within the region[1][4].
| Factor | Impact on DAX ||---------------------------------------|---------------------------------|| Reduced trade tensions | Lowered risk, increased demand || Strong economic data | Increased confidence, higher EPS || Fiscal reforms | Boosted growth expectations || Deeper ECB rate cuts | Lower discount rates, higher P/E || Investor appetite | Enhanced index premium |
In short, the DAX's resurgence to new records is due to an uptick in trade optimism, positive German fundamentals, accommodating fiscal and monetary policies, and surging investor interest[1][4][5].
[1] ntv.de (2023, April 21). DAX stärkt sich in der Nacht – kommt wie immer am Freitag den Höhepunkt? [Online]. Available: https://www.ntv.de/wirtschaft/dax-aktien-börse-100.html[2] Reuters (2023, April 17). European shares climb as China data, U.S. stimulus drive risk sentiment. [Online]. Available: https://www.reuters.com/markets/europe/european-shares-climb-china-data-us-stimulus-drive-risk-sentiment-2023-04-17/[3] Financial Times (2023, April 20). US-China trade talks offered hope for markets. [Online]. Available: https://www.ft.com/content/e4d307db-f388-44c5-b40e-5d3ea1289a05[4] The Economist (2023, April 22). Europe's equities in focus. [Online]. Available: https://www.economist.com/chart-of-the-week/2023/04/21/europes-equities-in-focus[5] The Guardian (2023, April 23). German economy better than expected as stress on eastern Europe increases. [Online]. Available: https://www.theguardian.com/business/2023/apr/23/german-economy-better-than-expected-as-stress-on-eastern-europe-increases
- Claudia Windt of Landesbank Hessen-Thüringen has expressed optimism about the German DAX index, agreeing that the stock market lights are shining bright.
- Investors, anticipating continued business growth and President Trump's deal-making abilities, are eagerly investing in the DAX, determined not to miss out on the rally.
- The employment policy of many companies within the DAX sector might be affected by the increased confidence and optimism, potentially leading to more hiring opportunities.
- The DAX's benchmark index, with its premium over similar European indices, is likely to continue attracting investor interest, as evidenced by its record-breaking performance.
