The Dax index recorded a significant decline and a new record high on Wednesday. At the Xetra closing, the index was calculated at 20,575 points, a 1.5 percent increase compared to the previous day’s close. Bayer, Brenntag, and Vonovia led the price list shortly before the market close, while Commerzbank, Airbus, and MTU were at the end of the list.
The release of new US inflation data in the afternoon was the main reason for the positive sentiment among investors. Immediately after the data was published, the Dax surged upward. “After the shock of the strong US labor market report on Friday, the general rehearsal with producer prices on Tuesday, and today’s final relief after consumer prices rose less than expected, the market is finally exhaling” said Konstantin Oldenburger, a market analyst at CMC Markets.
“In particular, the unexpected decline in the core rate allowed the bond market to breathe a sigh of relief, with the yield of the 10-year US government bond falling to 4.64 percent, moving away from the critical five percent mark.” Those who had already written off interest rate cuts in the US this year and had sold their stocks were “completely off the mark” Oldenburger added.
“The relaxation after the inflation data was also felt in Frankfurt, where the Dax took a strong drink from the bottle and jumped to a new record high after the numbers, despite further bad news about the domestic economy.” The German gross domestic product shrank by 0.2 percent in 2024, following a decline of 0.3 percent in 2023. It is only the second time since 1950 that the economy has shrunk in two consecutive years. “It is thus also a disastrous final report card for the government coalition, whose term in office is coming to an end in the next few months” said the market analyst.
“However, it’s not over yet. The prospects remain bleak” added Oldenburger. “The Bundesbank is forecasting a growth of only 0.2 percent for this year and even warns of a further contraction if the designated US president Trump carries out his tariff threats.” Furthermore, there are many, especially structural, challenges that need to be addressed in the country.
The European common currency was slightly weaker in the afternoon: one euro cost 1.0290 US dollars, and one dollar was worth 0.9718 euros.
Meanwhile, the oil price rose significantly: a barrel of North Sea Brent crude cost around 17:00 German time 81.47 US dollars, a 1.9 percent increase from the previous day’s close.