Germany’s stock market continues to perform strongly, with the DAX reaching a new all-time high for the second consecutive trading day on Monday. The index rose 1.57%, approaching the 20,000 mark, driven by strong performances in technology, financial, and industrial sectors, despite broader economic concerns.
The DAX has surged 19% year-to-date, making it the top performer among European stock markets, even as Europe’s broader equities lag behind. The Pan-European STOXX index has gained just 7%, while France’s CAC 40 has posted negative growth for the year. Meanwhile, global indices like the S&P 500 (+27%) and China’s A50 (+15%) have outperformed European markets.
Factors Behind the Rally
The rally in the DAX is largely attributed to global market trends and the exceptional performance of key sectors, particularly technology, finance, and industrials. The DAX closely mirrors Wall Street’s movements, benefiting from global bullish sentiment.
The technology sector, buoyed by the AI boom, has seen remarkable growth. SAP, Germany’s largest tech company, has surged 65% year-to-date, becoming Europe’s largest tech firm and the second-largest European company by market value. SAP’s focus on AI has driven robust third-quarter results and a raised full-year outlook. The company now has a market capitalization of €278.63 billion, representing around 15% of the DAX.
The financial sector also contributed to the DAX’s gains, with Deutsche Bank shares up 26% as banks benefit from higher interest rates. The defense and industrial sectors have thrived amid increased defense spending in the EU and US. Notably, Siemens Energy and Rheinmetall AG saw impressive share price increases of 328% and 117%, respectively, this year.
However, Germany’s automotive sector has faced significant challenges, including rising inflation, competition from Chinese manufacturers, and weak global demand. Major carmakers, including Volkswagen (-28%), Porsche AG (-26%), and Mercedes-Benz (-15%), have issued profit warnings.
Economic Struggles and Political Instability
Despite the strong stock market performance, Germany’s economy is struggling. Manufacturing has been in contraction for two years, and the Ifo Business Climate Index dropped for the fifth consecutive month in November. Germany’s GDP grew by just 0.1% in the third quarter, following a slight contraction in Q2, with economists warning of a potential recession.
The country’s political instability further complicates the economic outlook. The ruling coalition faces the risk of collapse, and a snap election is scheduled for February. This political uncertainty could undermine Germany’s appeal to investors.
