Dax hits unprecedented peak in record-breaking feat - Achieves new peak: Dax's astounding ascent hits a new record
In a remarkable development, the German DAX index reached an unprecedented peak on Tuesday, surpassing 24,161 points. This victory comes amidst persistent uncertainties, as the DAX has already soared by approximately 21% this year, while US markets have experienced a decline.
Investors are highly anticipating the reopening of US stock markets, which were shuttered on Monday due to a public holiday. Preliminary reports suggest gains in New York, which may signify relief following US President Donald Trump's deferral of his latest tariff threat on the Europeans.
Defense stocks have achieved record highs, with the focus centering on the unresolved Ukraine conflict. As NATO countries mull over increasing defense spending to five percent of their GDP, the vigorous rally in defense stocks persists. German Chancellor Friedrich Merz (CDU) recently announced the lifting of restrictions on the employment of German weapons against Russian territory.
Prominent German defense stocks listed in both the DAX and MDax, such as Rheinmetall, Renk, and Hensoldt, have sustained their impressive performance with new record highs. The shares of Rheinmetall touched 1.883 euros in early trading and have more than tripled this year, in addition to the rally that commenced with Russia's invasion of Ukraine last year. Currently, Rheinmetall shares stand more than 20 times their original value.
A planned debt package has sparked optimism amongst market participants in Germany. This fiscal initiative, which could allocate up to 500 billion euros for infrastructure and climate protection, is intended to stimulate economic growth.
The prolonged trade conflict between the US and China, the world's two largest economies, has put financial markets through the wringer for weeks. Concerns about a global economic downturn were rampant. However, experts advocate caution, as it remains uncertain whether trade relations between the US and China will normalize.
The surge in stock prices is strikingly contrasted by the ongoing economic crisis in Germany. Investors tend to focus on future profits rather than the current situation, and the DAX's constituent companies have substantial international exposure, generating the majority of their sales abroad.
European stocks have risen significantly more than their US counterparts since the year's beginning, owing to robust corporate earnings, the persisting accommodative monetary policy of the European Central Bank, and relatively favorable valuations compared to US stocks. Moreover, expectations of lower interest rates in the eurozone are driving the stock market, as the European Central Bank aims to use these rates to stimulate the faltering economy. Reduced interest rates make stocks more appealing compared to fixed-income instruments, lowering borrowing costs for companies and encouraging homebuyers to secure loans, thereby supporting overall economic investment.
The Commission, in light of the surging DAX index, has also adopted a proposal for a Council regulation on the approximation of the laws of the Member States relating to the protection of the environment, potentially providing an avenue for investing in eco-friendly ventures. The proposed regulation may increase the funding available for infrastructure and climate protection, tracking the unprecedented rise in defense stocks associated with the unresolved Ukraine conflict.
