DAX: German GDP Shows Larger than Expected Contraction – Stocks Hold on to Gains
German GDP contracts for sixth consecutive quarter, ECB policy keep market’s bullish momentum alive.
- GDP YoY contracts more than expected
- Fears of Europe’s largest economy heading for recession
- DAX sets new all-time during morning session
The DAX posted a new all-time high today of 21,722 before retreating after poor GDP data. ECB policy expectations now sole driver of bullish momentum.
GDP Data Stall DAX Rally
GDP data sent the DAX slightly lower from today’s highs. But what would usually have created a large bout of volatility has been subdued to say the least.
GDP YoY for Q4 2024 showed the economy contracted by 0.2%, for 6 consecutive contractions. The forecasts had been for the YoY data to print at 0.0% after last month’s contraction of 0.3%.
The government cut its GDP forecast for 2025 to 0.3% from 1.1%, citing trade tensions and political uncertainty.
Today’s data confirms that the German economy contracted for a second year in a row in 2024. Foreign competition, especially EV, high energy costs have taken their toll.
Various of the country’s top manufacturers have announced job cuts and plant shutdowns. With Volkswagen’s announcement of the closure of two plants, an unprecedented event in the company’s history.
DAX Live Chart
The DAX Maintains its Footing
Looking at market activity after another release of poor economic data, we see the market sold off slightly but recovered ground quickly.
Considering the outlook of so many of the companies that make up the DAX index and the dire state of the economy, there can only be one reason the DAX is posting new ATHs.
I would incline to that reason being ECB policy and the fact it will lead to a weaker euro. The market expects the ECB to cut rates at least 4 times this year. The first cut is expected today, which would take the main rate from 3.15% to 2.9%.
Analysts and investors expect the other 3 rate cuts to bring the main rate to 2%. This level is what many ECB officials have stated as the neutral rate.
ABOUT THE AUTHOR
See More
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals
Top Broker