The German stock market, as measured by the Dax, showed a significant increase on Tuesday morning, ahead of the Bundestag’s vote on the new school funding package. By 12:30, the lead index had reached around 23,425 points, a 1.2 percent increase from the previous day’s closing. In the morning, the index temporarily rose above its all-time high of 23,475 points.
Leading the market were shares of Rheinmetall, Bayer and Continental, while those of Beiersdorf, Vonovia and the Telekom were at the lower end of the list.
“The potential coalition partners are igniting the economic rocket with their planned large-scale government spending” said Thomas Gitzel, chief economist of VP Bank. “The Merz turbo is putting the German economy on the fast track. At least, that’s what the hopes of the financial market analysts surveyed by the ZEW are saying.”
The ZEW data published in the morning showed a significant increase compared to the previous month. “The ZEW economic expectations are the first prominent early indicator that provides a pointer on how strongly the German economy will react to the higher spending on infrastructure and defense. The response is clear: the growth will accelerate significantly” Gitzel said further.
“The companies involved in infrastructure construction have a secure planning basis and can now invest in additional capacity” the economist said. “However, it will take a while before the money shows positive growth effects. Stimulation of the economy through the budget will likely only become visible in 2026.”
The government, however, also has a role to play in this. “If parallel to the higher government spending, there are also faster planning and approval procedures, the time until positive economic effects can be shortened” the expert said. In general, the higher spending should be accompanied by structural reforms, the expert added.
The European common currency was slightly stronger on Tuesday afternoon, with one euro costing 1.0935 US dollars and one dollar being worth 0.9145 euros.
Oil prices rose significantly, with a barrel of Brent North Sea oil costing around 71.98 US dollars at 12:00 German time, a 1.3 percent increase from the previous day’s close.