FRANKFURT (dpa-AFX) - After the DAX broke through resistance last week, the German stock market appears poised for a strong finish to an already impressive year just before Christmas. Driven by booming sectors such as Artificial Intelligence and defense, the German benchmark index has gained more than a fifth in value so far in 2025.
Recently, the overall market has also received fresh momentum from stocks that allow investors to benefit from an anticipated revival of the German economy next year, as well as from the reconstruction of Ukraine following a hoped-for diplomatic end to Russia's war of aggression against the country.
Beneficiaries of a German economic recovery—also boosted by sharply rising government investments—would include IT companies updating outdated technology in public agencies and profiting from increased demand among small and medium-sized enterprises. The construction sector would also benefit, as would banks financing numerous projects.
The public sector and companies continue to benefit from relatively low interest rates as the eurozone heads into 2026 with hopes for economic recovery. For the fourth time in a row, the European Central Bank (ECB) recently left interest rates unchanged, with the deposit rate relevant to savers and banks remaining at 2.0 percent.
This, along with positive economic signals from the United States, helped the DAX defend the psychologically important 24,000-point mark. In the US, the unemployment rate unexpectedly rose to 4.6 percent, but job gains remained solid given the new political climate, according to Ulrich Kater, chief economist at Dekabank. He notes that changes in the US administration's immigration policy have limited the labor supply, making sustained job growth more difficult.
"Both equity and bond markets interpreted the figures as confirmation of the strong state of the US economy. Financial markets were also buoyed by unexpectedly weak US consumer prices, which theoretically gives the US Federal Reserve more room for further rate cuts," Kater said. Just a few days ago, the Fed lowered its key interest rate, and further steps are likely to follow in 2026.
However, investors may have to wait until the new year for any major new impulses for the financial markets. Despite intensified diplomatic efforts, there is still no breakthrough in efforts to secure peace in Ukraine. Instead, Russian President Vladimir Putin continues to rail against Ukraine and its supporters from the EU.
Investors should also keep an eye on the conflict with oil-rich Venezuela, triggered by the United States, as a potential flashpoint. The US administration has now deployed military forces in the Caribbean, including the world's largest warship. Initially, US President Donald Trump cited the fight against drug smuggling, but it has since become clear that the focus is on the country's oil reserves. Trump has now ordered a blockade of all sanctioned oil tankers traveling to and from Venezuela, arguing that the South American country has stolen oil, land, and other assets from the US—assets he says must be returned. In the early 2000s, Venezuela nationalized oil fields, affecting US companies as well.
Away from global affairs, the short Christmas week, with only two trading days, brings numerous changes to the DAX family of indices. Newcomers Aumovio and TKMS will join the MDAX, while Gerresheimer and Hellofresh will be relegated to the small-cap SDAX index.
Along with pharmaceutical packaging producer Gerresheimer and meal kit provider Hellofresh, the SDAX will also include prosthetics manufacturer Ottobock, toy company Tonies, biofuel producer Verbio, and PSI Software.
Leaving the SDAX will be LPKF, Stratec, Thyssenkrupp Nucera, Formycon, Procredit, and Amadeus Fire. There are no changes in the blue-chip DAX index./mis/ajx/nas
By Michael Schilling, dpa-AFX
