Thursday Dec 7 2023 09:44
4 min
On Wednesday, Frankfurt's blue-chip DAX 40 index reached a new record high of 16,640 points, fueled by growing expectations that major central banks might pause rate hikes and potentially initiate interest rate cuts sooner than previously expected.
The index’s big gainers were German tourism group TUI, which soared by 11% after projecting a 25% increase in operating profit for the year and considering delisting from London. Auto maker Volkswagen also rose 3% following an audit of its jointly owned site in Xinjiang, China, which found no indications of forced labor.
Pharmaceutical company Merck saw a decline of over 13% after its experimental multiple sclerosis drug evobrutinib failed to meet the primary objective in late-stage trials. As for the overall economy, German factory orders fell by 3.7% in October, missing market expectations of a 0.2% rise. Additionally, a PMI survey indicated that the country's construction sector remained in a deep recession last month.
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In a summary of recent market moves in his morning notes on Wednesday, Markets.com Chief Market Analyst Neil Wilson wrote that the DAX 40’s rise was “startling”:
“Narrative check: Rates go down, stocks go up; or crap German data sends DAX to record high ... bad news is good news for equities right now. Stocks rose early on Wednesday in Europe as the DAX came off the back off a record closing high. Shares rose a further quarter of a percent in Frankfurt, whilst London rallied half a percent early on with lower bond yields feeding risk appetite. The DAX is now up almost 13% since October 26th in a startling one-way move.”
The DAX has gained 8.8% over the past month during a stock market rally on both sides of the Atlantic underpinned by growing hopes that major central banks have finished raising rates.
At the time of writing on Wednesday, the DAX index traded above the 16,640 mark, and was up 0.67% on the day.
The DAX, also referred to as the Deutscher Aktien Index or GER40, is a stock index comprising 40 of the largest and most liquid German companies listed on the Frankfurt Exchange. Price data for calculating the DAX Index is sourced from the Xetra electronic trading system. The index weightings are determined using a free-float methodology, coupled with an assessment of the average trading volume.
The DAX was created in 1988 with an starting index level of 1,163 points. Member companies in the DAX collectively account for around 80% of the total market capitalization traded on the Frankfurt Exchange. Originally consisting of 30 companies, the index was expanded to include 40 companies on September 3, 2021.
As of December 6, the three largest companies on the DAX 40 by market capitalization were multinational software company SAP (over $187.7 billion), technology conglomerate Siemens (over $137.2 billion) and telecom giant Deutsche Telekom (close to $121 billion).
When considering shares and indices for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
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