Economic growth of DAX is decelerating due to inflation worries
DAX Takes a Hit as August Weakness and Trade Tensions Bite
The German stock market index, the DAX, experienced a decline at the end of the week, with the index closing at 13,786.29 points, down 0.67 percent from the previous day's close. This weakness can be attributed to a combination of seasonal August weakness, international capital outflows, and mixed market sentiment.
August is historically a weak month for the DAX, with an average decline of 2.2% and gains in only 47% of recent years. This seasonal trend makes it more vulnerable to negative influences, as seen this week. Additionally, despite a technical recovery from earlier lows, market sentiment remained pessimistic due to factors such as renewed tariff threats against the EU by Donald Trump and uncertainty around trade deals, which dampened investor confidence and led to international capital outflows, further pressuring the DAX.
Among the companies that showed significant declines were Deutsche Bank, Covestro, and Beiersdorf. While the exact details for these particular companies’ declines were not specified explicitly, the broader context suggests that the negative mood and cautious investor behavior in August—exacerbated by tariff tensions and macroeconomic uncertainties—likely contributed to their share price drops. Quarterly earnings reports from several DAX companies, including large firms like Allianz, Siemens, and Deutsche Telekom, influence investor decisions, suggesting that any disappointing or cautious outlooks in these earnings releases could have also affected these sectors and stocks.
On a positive note, Infineon's share price increased by over two percent, placing it at the top of the DAX price list. Volkswagen and RWE followed Infineon in the list. However, the strengthening of the US dollar, with one dollar currently worth 0.8247 euros, may have contributed to the overall downward pressure on the DAX. The weakness in the European common currency is not explicitly stated as related to the DAX's performance.
Market observers attribute the DAX's weakness to fears of increased inflation and interest rate concerns in government bonds. Despite this, investors remain cautious, with some rebounds observed but hesitancy to buy keeping downward pressure on stocks. As the week comes to a close, the DAX will be closely watched to see how it recovers from this latest setback.
*Sources:*
- Investopedia
- Reuters
- CNBC
- The declining stock market index, the DAX, may have been influenced by other industries beyond finance and business, as renewed tariff threats against the EU, trade deal uncertainties, and seasonal trends have all impacted investor confidence.
- Weakness in the European common currency and fears of increased inflation and interest rate concerns in government bonds are putting additional pressure on various business sectors, including finance, and adding to the negative impact on the DAX.
