DAX Ponders Upcoming General Election, Ukraine-Russia Peace Deal
The German stock market took a pause of reflection this morning trading almost flat on the day, as the general election approaches.
- General election expected to provide new government
- Investors see possibility of peace deal
- Hopes for cheaper energy and a trade deal boost confidence
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The DAX opened almost flat on the day, trading up at 0.2% on the day at one point. The market may remain trendless today as we run up to election Sunday.
New Government Expected to Boost DAX
Investors are looking for the election on Sunday to foster a new government capable of creating opportunity.
The wish may be a tall task, the most likely winner according to recent polls would not have a clear majority.
The latest polls put the conservative CDU/CSU alliance in front with 29%-30% of the votes. The second most voted party would be the AfD with 20%/21%.
However, the CDU has already stated they will not work with the AfD, and that leaves the only other possibility to form a government being a coalition with the SPD (socialists).
The socialist party is expected to garner 15%-16% in this round of elections. But it would be enough to secure more than 50% of the seats in the Bundestag for this unlikely alliance.
DAX Live Chart
Peace Deal and Trade Deal on the Horizon
I don’t believe the investor sentiment that a new German government will help restore the economy in what used to be Europe’s powerhouse.
More likely, it’s the perception that the US will be able to broker a peace deal. A lot of attention has been given that the EU and Ukraine were left out of the peace talks.
But that doesn’t seem surprising when the EU has heartedly pushed for a continuation of the war.
The other scenario I believe is keeping the DAX at the highs is the increasing likelihood of a trade deal. Trump’s tariff threat seem to have sorted the desired effect.
The EU commissioner is now talking about lowering the EU’s tariffs on many US goods to match them to the US tariffs on EU goods. The deal would avert a trade war and allow EU exports to continue reaping their profits.
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