German equities experienced a continued downward trend on Tuesday, extending losses after a sluggish opening. The DAX index closed around 24,120 points, reflecting a 1.1% decrease compared to the previous day’s close. While Zalando, Vonovia and Volkswagen led the list of gainers, Siemens Energy, Rheinmetall and Continental faced significant losses.
The release of the October ZEW Economic Sentiment Index offered minimal respite, revealing a slight uptick in optimism among financial market analysts, albeit without sparking any significant enthusiasm. While expectations for exporters saw a marginal improvement, fueling hopes for a potential recovery in the beleaguered export sector, the fragility of this potential remains a critical concern. Thomas Gitzel, Chief Economist at VP Bank, cautioned that escalating trade tensions between China and the United States threaten to quickly undermine any positive momentum.
Recent industrial data paints a bleak picture. Gitzel noted the declines in August order intake, industrial production and exports, questioning the viability of any genuine upturn. The underlying issue appears to be a prolonged period of weakness that broader government initiatives are struggling to immediately counteract.
While the ZEW index suggests a modest economic recovery is anticipated, the impact of government-led infrastructure investment is likely to be tempered compared to previous cyclical upswings. This signals a potentially slower, more drawn-out recovery process. Experts are skeptical whether the magnitude of these investments will be sufficient to fully offset the impacts of structural issues plaguing the German economy, particularly its reliance on exports.
The euro experienced a slight depreciation, trading at $1.1554 midday. Simultaneously, oil prices plummeted, with Brent crude falling to $61.98 a barrel, a decrease of 2.1% from the previous day’s close. This decline further intensifies concerns about broader global economic headwinds impacting key markets and reinforces the precarious outlook for German exporters and related industries.