DAX Index analysis: Why German stocks are rising this year

The DAX Index has held steady in the past few days and is hovering at near its all-time high of €24,635. It was trading at €24,378 today, up by over 32% from its lowest level in April. This article highlights why the blue-chip German index is rising and the top movers this year.

Reasons why the DAX Index is soaring

There are three main reasons why the German DAX Index is in a strong rally this year. First, the rally is being supported by the actions of the European Central Bank (ECB), which has slashed interest rates several times and brought them to 2% this year.

It is common for the stock market to do well when the central bank is cutting interest rates as this makes the equities market more interesting than bonds.

The index has also reacted positively to the interest rate cuts by the Federal Reserve, which cut them by 0.25% in the last meeting in September. Analysts expect that the bank will cut interest rates again later this year.

The DAX Index has also jumped because of the general correlation with the other global indices like the Hang Seng, Dow Jones, and the S&P 500. Historically, these global indices have had a close correlation with each other.

Additionally, the index benefited from the increased government spending in Germany as officials sought to supercharge the economy.

The gains, however, have been limited by Donald Trump’s tariffs, which have applied on all goods that Germany sells to the United States, especially its vehicles. Trump has warned that he will add a 25% tariff on trucks, a move that will affect Daimler Trucks, one of the biggest players in the industry.

Porsche, the maker of luxury vehicles, has been one of the most affected companies by Donald Trump’s tariffs as the US is its only growing market. The most recent results showed that the Chinese business has continued to deteriorate, while Europe is not growing. Porsche makes all its vehicles in Germany, meaning that it has to pay more in tariffs than other manufacturers.

Top gainers and laggards in the German DAX

The top gainer in the DAX Index this year is Rheinmetall, the giant company in the defense industry whose shares have jumped by 207% this year amid increased defense spending. 

Siemens Energy share price has soared by 112% this year and 211% in the last 12 months, making a spectacular comeback for a company that received a government bailout a few years ago. Its performance has happened because of the ongoing demand for power globally.

The Commerzbank share price has jumped by 100% this year, helped by the ongoing speculation that Unicredit will make a full bid for the company. 

The other top gainers in the DAX Index this year are Deutsche Bank, Heidelberg Materials, Bayer, E. On, Fresenius, and RWE. On the other hand, the top laggards in the index are Symrise, Beiersdorf, Adidas, Zalando, and Merck.

DAX Index technical analysis 

DAX chart | Source: TradingView

The daily timeframe chart shows that the DAX Index has rebounded in the past few days, moving from a low of 23,347 in September to a high of 24,400 today. It is now hovering near the year-to-date high of 24,635.

The index has remained above the 50-day and 100-day Exponential Moving Averages (EMA). It has also formed an ascending triangle pattern, which often leads to a strong bullish breakout over time.

Therefore, the most likely scenario is where it jumps in the coming weeks and hits the important resistance level at 25,000. A drop below the support at 24,000 will invalidate the bullish outlook.

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