The German stock market benchmark, the DAX, edged slightly higher on Thursday, closing at 25,127 points, representing a marginal gain over the previous day’s close. The index experienced a volatile trading session, initially opening positively before dipping into negative territory by midday, only to recover and return to positive ground in the afternoon.
The modest recovery has been attributed to renewed optimism surrounding Germany’s economic recovery, largely fuelled by unexpectedly robust figures released regarding industrial order intake. Christine Romar, Head of Europe at CMC Markets, noted, “Hopes for the long-awaited economic upturn in Germany have been bolstered by the surprisingly strong upward trend in industrial orders”. She suggested that investor patience regarding the government’s planned defense and infrastructure spending packages and accompanying fiscal incentives, may finally be yielding results. Industrial orders have now risen for the third consecutive month, increasing by 5.9% in November alone, representing a near-10% surge over three months – a development some analysts are characterizing as a nascent boom.
Crucially, this surge in demand appears to be originating from within Germany itself, a departure from previous trends reliant on foreign orders. Romar highlighted a particularly strong demand for military goods, alongside products and major projects within the metalworking and technology sectors. The sustainability of this trend is being scrutinized; if maintained, it could potentially deliver a positive economic surprise for Germany this year, potentially justifying the high valuations already embedded in the DAX. The disconnect between current index performance and underlying economic reality could begin to narrow, potentially alleviating investor concern over lofty valuations.
Trading in Frankfurt saw Deutsche Telekom, Adidas and Bayer leading the gains, while Infineon and Siemens Energy lagged behind.
Beyond the stock market, energy prices presented a mixed picture. Natural gas prices continued their downward trajectory, falling to €28 per megawatt hour (MWh) for February delivery, representing a 4% decline from the previous day and suggesting consumer prices of at least 7-9 cents per kilowatt-hour (kWh) if this trend continues. Conversely, oil prices saw a significant increase; a barrel of Brent crude reached $61.19, a 2.1% rise compared to the previous trading day’s close.
The euro also weakened, trading at $1.1653, with the dollar fetching €0.8581. This fluctuating landscape highlights the complex interplay of factors – from government policy to global energy markets – influencing Germany’s economic outlook and, in turn, impacting investor sentiment. The true test will be whether the current rebound in industrial orders translates into sustained economic growth and whether the government can deliver on its promised fiscal stimulus, solidifying the DAX’s current valuation.