The German DAX index rallied strongly following the US elections, mirroring gains in global stock markets. This upward momentum was further supported by strong earnings reports from German companies, which helped maintain the index’s uptrend despite ongoing concerns about potential US tariffs and weakening demand signals from China.
Stock Earnings Highlights
Continental AG led the way, surging 10.62% on positive earnings results, while Rheinmetall AG also gained, climbing 3.48% as demand for defense stocks increased on expectations that the EU might boost defense spending following Trump’s victory.
The auto sector, however, experienced a mixed session. BMW and Volkswagen posted gains, but Porsche stock declined. Daimler Truck Holding and Mercedes-Benz Group closed the session in the red. Concerns over Trump’s proposed tariffs on EU goods and weak demand from China continued to create headwinds for auto stocks.
Bayer shares dropped 8% after the conglomerate revised its full-year operating earnings forecast downward, attributing the adjustment to weaker agricultural markets in Latin America.
German Economic Data
Germany’s ZEW Economic Sentiment Index was weaker than anticipated, with a rise of 7.4 versus the expected increase of 13.2. Additionally, German inflation increased to 2.4% in October, up from 1.8% year-over-year in September, confirming preliminary data.
While European Central Bank policymakers may be concerned about inflation in the eurozone’s largest economy rising above the 2% target, this is unlikely to prevent further easing of monetary policy as the year-end approaches.
Political Tensions
Germany’s political landscape remains tense as Chancellor Olaf Scholz prepares for a vote of confidence in parliament on December 16, following the collapse of his three-way coalition. This could set the stage for snap elections, further adding to market uncertainty.
Investor sentiment remains cautious amid Trump’s return to the White House and his proposed tariff policies, which could lead to renewed trade tensions.
Additionally, Germany’s relationship with China, its largest trading partner, remains pivotal. Any deterioration in these ties could have significant consequences for German industrial stocks and the broader market.
Technical Analysis
Source: TradingView
The DAX index reached a high of 19,630 on October 29 before pulling back, finding support around the 19,000 level just below the pivot line.
The price subsequently rallied, hitting resistance at 19,540 before pulling back once more to trade near the pivot at 19,220.
If the bulls can regain control, the index may hold above the pivot line and potentially breach resistance, aiming for new highs.
However, if bearish pressure prevents the price from reclaiming resistance or staying above the pivot, a support level could form around 18,760 in the event of further declines.
