FRANKFURT (dpa-AFX) - After the DAX's breakout last week, the index has little time left for further potential gains. However, Germany's leading index has already climbed by more than a fifth this year, fueled by booming sectors such as artificial intelligence and defense.
Recently, the overall market has also received a boost from stocks that allow investors to benefit from a potential 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.
Companies set to benefit from a recovery in the German economy—driven in part by massive increases in public investment—include IT firms updating outdated government technology and profiting from rising demand among small and medium-sized enterprises. The construction sector would also benefit, as would banks financing numerous projects.
Both the public sector and companies continue to benefit from relatively low interest rates as the eurozone heads into 2026 with renewed economic hopes. For the fourth consecutive time, the European Central Bank (ECB) recently left interest rates unchanged, with the deposit rate relevant for 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 U.S., the unemployment rate surprisingly rose to 4.6 percent, but job growth remained solid under the new political conditions, according to Ulrich Kater, chief economist at Dekabank. He notes that the U.S. administration's changed immigration policy restricts labor supply, making sustained job growth more difficult.
"Both equity and bond markets interpreted the numbers as confirmation of the strong state of the U.S. economy. Financial markets were further buoyed by unexpectedly weak U.S. consumer prices, theoretically giving the Federal Reserve more room for further rate cuts," Kater said. Just a few days ago, the Fed lowered its key interest rate, with further moves expected in 2026.
For major new impulses in the financial markets, investors may have to wait until the new year. Despite intensified diplomatic efforts, no breakthrough is in sight in the quest for peace in Ukraine. Instead, Russian President Vladimir Putin continues to speak out against Ukraine and its EU supporters.
Investors should also keep an eye on the conflict between the United States and Venezuela in the Caribbean as a potential disruptive factor. Over the weekend, the U.S. Coast Guard, for the first time since the implementation of a U.S. blockade against sanctioned oil tankers traveling to and from Venezuela, took control of a vessel off the coast. The Venezuelan government sharply criticized the operation in the Caribbean.
U.S. President Donald Trump had, just days earlier, ordered a "total and complete blockade of all sanctioned oil tankers traveling to and from Venezuela." He justified the move by stating that the South American country had stolen oil, land, and other assets from the United States—assets that must be returned. In the early 2000s, Venezuela nationalized oil fields, affecting U.S. companies as well.
The aggressive approach has led political observers to question whether the U.S. government is targeting the country's vast oil reserves: Venezuela possesses the world's largest confirmed oil reserves and is heavily dependent on export revenues. Much of its oil is shipped to China, a geopolitical rival of the United States.
Away from global events, the start of the short, two-day Christmas trading week brings numerous changes within the DAX family. Newcomers Aumovio and TKMS are joining the MDAX, while Gerresheimer and Hellofresh are being relegated to the small-cap SDAX index.
Alongside pharmaceutical packaging manufacturer Gerresheimer and meal kit provider Hellofresh, the SDAX will also include prosthetics maker Ottobock, toy company Tonies, biofuel producer Verbio, and PSI Software.
Leaving the SDAX are LPKF, Stratec, Thyssenkrupp Nucera, Formycon, Procredit, and Amadeus Fire. There are no changes in the leading DAX index./mis/ajx/nas/he
By Michael Schilling, dpa-AFX
