Investors are optimistic about the DAX reaching record highs, aided by positive German industrial data, despite ongoing tariff negotiations with the US. The index rose by 0.5 percent, nearing its all-time high. Market sentiment remains cautious, with concerns over US trade policies and upcoming labor reports. Meanwhile, Asian markets gained from Wall Street’s performance, and notable corporate developments include Hannover Re’s record profit and Ford’s projected losses in electric vehicles.
With the absence of new announcements from the US government regarding the tariff dispute, investors are setting their sights on another potential record high for the DAX, buoyed by strong data from the German industrial sector.
In early trading, the DAX has increased by 0.5 percent, reaching 21,695 points. The previous day, it closed at 21,585 points, marking a 0.4 percent rise. The index is edging closer to its all-time high of 21,800 points. Currency analysts at Commerzbank commented this morning, ‘Trump is giving us a breather.’
Despite these gains, uncertainty persists in the stock market. Investors remain cautious as they monitor the tariff negotiations and political actions from the US government. However, no new tariff measures have been announced yet. Jürgen Molnar, a strategist at broker RoboMarkets, cautioned that any market recovery in the upcoming weeks and months should be approached with skepticism.
Other analysts have echoed these sentiments, warning that increased volatility in stock markets may be on the horizon due to the unpredictable nature of US trade policy.
Market Sentiment: A Contradictory Indicator
Salah-Eddine Bouhmidi, a market expert at IG Markets, believes that the current subdued market sentiment may actually indicate potential price increases: ‘The increasingly neutral outlook among institutional investors could propel the DAX higher, pushing it towards new all-time records,’ he noted.
This perspective is supported by a sentiment survey from the American Association of Individual Investors (AAII), which HSBC analysts have referenced. It reveals that the percentage of pessimistic American retail investors has surged to 42.9 percent, significantly exceeding the historical average of 31.0 percent.
A decline in investor sentiment can suggest that stock prices may continue to rise. The rationale is that when investor confidence is high, many are already fully invested, limiting further purchases. Conversely, when sentiment is low, it often means investors are holding back, waiting for favorable buying opportunities.
Monitoring US Monetary Policy
Investors are also keenly awaiting the upcoming monthly labor market report from the US, set to be released tomorrow. There are hopes that it will provide clarity on the Federal Reserve’s monetary policy direction. A robust labor market could diminish the likelihood of further interest rate cuts, a scenario that would be unfavorable for the stock market.
According to Helaba, today’s initial jobless claims will serve as a crucial indicator. Currently, there are no signs of significant job growth weakening. ‘Overall, the US Federal Reserve is likely to maintain its current stance on interest rates,’ experts from Helaba asserted.
Positive Trends in German Industry
The German industrial sector ended the challenging year of 2024 on a slightly positive note, as orders rose by 6.9 percent in December compared to the previous month, according to the Federal Statistical Office. However, for the entire year of 2024, order intake was still down by 3.0 percent compared to the previous year.
Jörg Krämer, chief economist at Commerzbank, described the unexpectedly strong end-of-year increase as a beacon of hope. ‘For a lasting recovery in Germany’s struggling industry, we need a revitalization in economic policy, although potential coalition partners have differing viewpoints,’ Krämer stated. ‘For now, I anticipate a gradual upward trend beginning in spring.’
Asian Markets React to Wall Street Gains
Asian markets experienced a boost today, fueled by gains on Wall Street, with a particular focus on technology stocks. The Nikkei index in Tokyo increased by 0.6 percent to 39,066 points, while the broader Topix index rose by 0.3 percent. Additionally, both the Shanghai Stock Exchange and the major indices for Shanghai and Shenzhen saw a 1.3 percent uptick.
Despite ongoing uncertainties under the new administration of US President Donald Trump, investors expressed relief that the situation has not worsened following the reciprocal tariff measures between the US and its key trading partners.
Hannover Re Reports Record Profit
Hannover Re, the world’s third-largest reinsurer, achieved a record profit last year, with a surplus increase of approximately 28 percent, reaching around 2.3 billion euros, primarily due to rising reinsurance prices. The company successfully met its revised forecast from November. However, during the contract renewals on January 1, 2025, Hannover Re faced a decline in prices within its property and casualty segment.
Metro’s Potential Exit from the Stock Market
Metro AG, a former member of the DAX, may soon exit the stock market entirely. Major shareholder Kretinsky has proposed a buyout offer of 5.33 euros per common share, even though the stock had previously dropped to the SDAX and closed at 3.91 euros, 36 percent below the proposed price.
Siemens Healthineers Starts Strong
Siemens Healthineers, the medical technology subsidiary of Siemens, kicked off its business year on a positive note. The company reported a nearly six percent increase in revenue, reaching 5.48 billion euros in the first quarter of 2024/25, despite ongoing weak demand from China. Adjusted earnings before taxes (EBIT) surged by eleven percent to 822 million euros.
Ford Faces Profit Challenges Amidst Competition
Ford, the American automotive giant, is projecting losses of up to five billion dollars this year in its electric vehicle and software sectors, mirroring losses from the previous year. The company anticipates a total profit before taxes ranging between seven and eight billion dollars, slightly lower than in 2024.
In the fourth quarter of 2024, Ford’s operating profit climbed to 1.8 billion dollars, a rebound from a loss of 500 million dollars the previous year, driven by employee pension costs. Overall revenue for the quarter reached 48.2 billion dollars.
US Banks Restructure Twitter Acquisition Loans
In a recent development, major US banks have begun offloading a portion of the loans extended to billionaire Elon Musk for his acquisition of the social media platform Twitter, now known as X. Led by Morgan Stanley, these banks have transferred liabilities totaling 5.5 billion dollars out of an overall 13 billion dollars to investors. Typically, such loans are sold shortly after a deal’s completion, but in this instance, lenders faced challenges in disposing of the debt.