Author: Gino Bruno D'Alessio

Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.

DAX Reverse Course After Yesterday’s All-Time High as Trump Tariffs Come into Effect

Posted on by Gino Bruno D'Alessio

Trump tariffs on Mexico and Canada become effective and the US president adds another 10% of tariffs to China.

dax slides as trump tariffs come into play

  • Global Markets rattled
  • DAX feels risk of tariffs on EU
  • Defense sector continues to outperform

The DAX turned south today, dropping 1.5% on the day after yesterday’s all-time high. Hopes for a new government and ECB policy the main driving factors of the rally.

These factors have outweighed a decline in exports to China, which used to be the Germany’s largest trading partner. And even the state of the German economy, which has been contracting for 2 years.

Reality Check on Trump Policy

Global markets are coming to the realization that Trump is not always playing poker. Today the well vented tariffs of 25% on Canada and Mexico become effective.

Investor sentiment has begun to assess the risk economic contraction that may arise from a trade war.

While the [[NAS100]] and the [[DOW]] have been in retreat for weeks, the [[DAX]] has continued to rally higher.

Yesterday’s DAX rally to a new ATH was mainly fueled by the comments at EU leaders’ meeting over the weekend. The politicians pledged greater spending in defense, which sparked a rally in sector stocks.

DAX Live Chart

[[DAX-graph]]

 

Defense Stocks Higher but DAX Falters

Defense sector stocks continues to rally as EU Commissioner Von der Leyen gives a speech on the commitment of the EU to strengthen the military.

Rheinmetall is up 3.01% and MTU Aero is 1.36% on the day. Of the 40 stocks in the index, only 6 are printing gains.

The DAX has had an outperformance to its global peers since the start of 2025. With expectations on ECB policy heavily acting as the driver for higher valuations.

However, the global impact of Trump’s policies and the fact that these same are likely to be inflicted on the EU are taking their toll on German stock investors.

DAX Gets Boost from Defense Spending Promises After Trump-Zelenskyy Fiasco

Posted on by Gino Bruno D'Alessio

The meeting between the 2 presidents at the white house precipitated into an accusation match and may have ended any peace agreement.

dax rallies on defense stocks

  • Zelenskyy defiantly ends hopes of a peace deal
  • European leaders commit to extra defense spending
  • Tariff woes tack back seat

The DAX rallied this morning by 0.83% as European leaders meeting over the weekend promised to spend more on defense spending. They also draw up a peace plan for the Ukraine-Russia conflict.

Zelenskyy Shows Great Lack of Statesmanship

The [[DAX]] has been spared a rout since European leaders met over the weekend to shore up rupture in bilateral relations at the White House meeting.

Zelenskyy and Trump had a rough a meeting on Friday, and whatever take you have on who may have been at fault, one thing is clear. The Ukrainian president does not want a peace agreement.

As Zelenskyy stated the only way to end this is by defeating Russia on the battlefield. Adding a call to arms of Nato troops, which would possibly be the only way.

President Trump has ruled out US intervention, and that would leave European countries to enter the conflict alone. The move seems unlikely, as the UK PM Stramer, said he would need US backing to send troops to Ukraine.

The question remains whether the EU and UK can broker a deal as they have stated a peace plan after this weekend’s meeting.

DAX Live Chart

[[DAX-graph]]

 

Arms Race Fuels Sector Stocks and DAX

Today’s rally is led by defense sector stocks and hopes of a peace deal despite the words from Zelenskyy.

EU leaders joined the UK prime minister to hold talks on the Ukraine-Russia conflict. The group committed to more defense spending. Something the German Chancellor in-waiting has already done.

The announcement gave defense sector stocks a large boost today, helping the DAX higher. Rheinmetall (RHMG) spiked 17.4% this morning.

While talks of a peace plan set forward over the weekend meeting have helped stabilize the broader stock market. Under light of possible peace, the tariff hikes from the US have taken a back seat, for now.

DAX Gains on Better Retail Sales & Unemployment Data, Hopes for Coalition Government Increase

Posted on by Gino Bruno D'Alessio

Retail sales were higher than expected, and unemployment change decreased more than forecast.

dax rallies on better than expected data

  • Retal Sales YoY up 2.9%, forecast 1.5%
  • Unemployment change up 5k, forecast 15k
  • Chancellor in waiting already holding coalition talks
  • Bundesbank warns of recession in 2025

The DAX rallied from today’s lows and is posting a gain of 0.36%, spurred largely by a surprise jump in retail sales and a drop in unemployment numbers.

Better than Forecast Economic Data

This morning’s data turned the [[DAX]] around, the index was losing 0.63% on the day before the news hit the screens.

Retail Sales YoY for January was forecast at 1.5%, a sharp decline from last month’s 2.8% increase. Today’s data showed that despite recent declines in consumer confidence spending is rising.

Another concern for consumers is the perception of a contracting job market. However, today’s unemployment change showed only 5k additional unemployed for February.

Analysts had expected a rise of 15k from 11k last month, so the surprise is more than unexpected given the general sentiment.

DAX Live Chart

[[DAX-graph]]

 

Three-party Coalition Talks

The chancellor in waiting, and leader of the CDU Merz, has already begun talks with his peers from the Socialist and Green parties.

Merz has stated his intention to get the government formed as quickly as possible. Various hurdles are bound to arise given the very different stances on spending and renewable energy.

The leader of the CDU has already back tracked on pre-election promises of closing the border, something both left wing parties are against.

However, extra spending, limited under the constitution and green energy subsidies are where the right and left parties are most divided.

Bundesbank Warns of 3rd Year of Stagnation

Joachim Nagel, the head of the German central bank warned of the increasing risk of a 3rd year of stagnation if action is not taken.

The Bundesbank president stated that fiscal reforms are necessary to stimulate demand, and that the new government needs to act quickly. The central bank is set to make proposals to increase borrowing but maintain fiscal stability.

Trump Tariff Threats Put Pressure on DAX – Automakers Take a Beating

Posted on by Gino Bruno D'Alessio

DAX retreats on Thursday from yesterday’s highs as Trump airs a 25% tariff on EU goods, including cars.

dax declines on proposed EU trade tariffs

  • 25% Tariffs on EU Trade
  • Nvidia earnings beat failed to rally markets
  • Automakers drop over 2%

The [[DAX]] loses 0.30% this morning after opening higher than yesterday’s close. Nvidia earnings beat was largely expected and did little to propel global markets as it has in the past.

Tariffs for the EU & Implications for the DAX

At a cabinet meeting held yesterday Trump said that the decision was made to implement 25% tariffs on EU trade.

Trump said the US would apply tariffs on EU goods “very soon” without specifying a date. Earlier statements on tariffs mentioned April 2 as the deadline.

The US president told reporters “It’ll be 25%, generally speaking, and that’ll be on cars and all other things.”

The discussion of tariffs arises from a broader view of how the EU, according to Trump, is designed to disadvantage the US.

The US has lately become Germany’s largest trading partner, overtaking China, which has seen a slump in demand for its goods. The stocks of companies in the DAX are heavily dependent on exports.

DAX Live Chart

[[DAX-graph]]

 

Automakers Feel the Crunch

Car makers fell heavily today as the effect of tariffs on autos would likely reduce demand from US consumers.

Automakers are leading the decline in the DAX index. This morning all the major auto stocks were trading down, with Volkswagen losing 2.05%, Porsche -2.38%, Mercedes 2.04%, and BMW -2.44%.

The implementation of 25% tariffs on goods and autos from Germany would put a heavy dent in revenues for all companies.

Auto exports to the US make up around 30% of German exports to the US. Taking 2024 data of €161 billion in exports that’s around €48 billion in value for auto exports.

Oxford Economics estimates a 25% tariff would cause a drop of around 7% in car exports. While the Ifo Institute estimated a harsh 50% decline.

It’s more likely the real effect is somewhere in between those two figures, in any case it’s going to have a negative impact on the DAX in general all things equal.

DAX Holds Ground on Ukraine-Russia Peace Deal Despite Fall in Consumer Confidence

Posted on by Gino Bruno D'Alessio

Consumer confidence showed an unexpected drop, while the US brokers a peace deal for the Ukraine-Russia conflict.

gfk consumer confidence drops more than expected

  • GfK/NIM Consumer Confidence declines to -24.7
  • Incomes expectations worst in over 1 year
  • Ukraine-Russia Peace deal keeps rally alive

The [[DAX]] gained 0.65% this morning as news arrived of a peace deal to end the Ukraine-Russia conflict. Consumer confidence continues to wane, and the main drivers of the market remain ECB policy and now the peace agreement.

Consumer Confidence Continues to Fall

The DAX took little note of the unexpected number for consumer confidence this morning. The index dropped 90 points and quickly recovered to push higher,

Forecasts had pinned today’s reading at -21.4, a slight improvement from last month’s -22.6. Today’s number for consumer confidence is the lowest since April 2024.

Households are concerned about the political and economic situation in Europe’s largest economy. Income expectations dropped to the lowest in 13 months based on higher prices and economic uncertainty.

The market is expecting the Bundestag to form a government quickly, if anything, in order to pass the next budget.

The winning alliance CDU/CSU faces a tall task to form an alliance with the socialist a green party. This unlikely coalition is the only path since the leader of the CDU has ruled out alliance with the second most voted party, AfD.

DAX Live Chart

[[DAX-graph]]

 

Reprieve Comes from the Ukraine-Russia Peace Deal

The hopes of the swift formation of a government are giving the DAX momentum. And the peace treaty for the Ukraine-Russia conflict has added hopes for a more stable economic background.

The deal which presumably will create revenue from a minerals deal for the USA, may also lead to the EU lifting sanctions on Russia.

That alone could boost the German economy as energy prices would expectedly fall. Germany is the country with the highest electricity prices in the EU.

In 2024, the average household cost per kWh was €0.24, while for German citizens the cost averaged €0.40 per kWh.

DAX Climbs Higher on Stronger Defense Spending – AI and Semiconductor Sector weigh

Posted on by Gino Bruno D'Alessio

The leader of the CDU party stated his intention of approving a large increase in defense spending giving sector stocks a boost.

DAX rises on promises of higher military spending

  • Talk of €200 billion in defense spending
  • US semiconductor restrictions weigh on DAX
  • Merz retreats on pre-election pledges

The [[DAX]] gained 0.65% this morning as talk of extra defense spending boosted sector stocks. While semi-conductor and AI stocks take a beating on US restrictions on semi-conductors.

Extra Defense Spending Paves the Way Higher

The DAX gained extra momentum this morning as the future chancellor opened up the idea of spending €200 billion in defense to modernize the German military.

Stocks such as Renk, Rheinmetall and Hensoldt are up 6.5%, 2.6% and 3.3% on the day respectively.

The military industrial complex creates spinoff business for various sectors, one stock to profit is Thyssenkrupp, up 14% on the day.

Today’s comments come after a number of main European leaders have committed to increasing defense spending. The comments came after Trump urged Europe to do more to maintain its own defense capabilities.

DAX Live Chart

[[DAX-graph]]

 

Semi-Conductor Sector Comes Under Pressure

Overnight Bloomberg report that the US administration is looking for ways to restrict semi-conductor technology going to China.

The news created a sell of in Chinese semi-conductor stocks, and the reverberations have been felt in Europe also.

Infineon stocks, a semi-conductor maker, dropped 1.7% today as concerns of what such might mean crossed the Atlantic.

The AI sector also felt some spinoff from the news, with Siemens Energy, with a high level of involvement in the sector, which fell 2.2%.

Investors Waiting to See Coalition

The DAX also got some momentum from the comments from CDU leader Merz, who stated that immigration may not be an important part of the new government’s agenda.

These comments are in strong contrast to the campaign promises of a tough stance on illegal immigration.

But the words mean that a coalition with the socialist and green parties is more likely. Leaving the door open to possible reforms in investment, which are greatly needed.

DAX Experiences Post Election Volatility, Maintains Rally

Posted on by Gino Bruno D'Alessio

The conservative CDU/CSU Alliance took the most votes in Sunday’s election, now needs to form a coalition to establish a government.

dax rallies after conservatives win election

  • Traditional conservatives win snap election
  • Short of an outright majority and will need to form a coalition
  • Stability will be undermined by opposing agendas

The [[DAX]] reacted positively to the news that the traditional conservative alliance won the most votes. The index opened up 1.4% in the pre-market session, before losing most of that ground and regaining it again.

Unlikely Coalition Only Path

The DAX saw a win from the establishment alliance of conservatives, CDU/SPU, indicating stability. However, the right-wing alliance, led by Merz, has stated they will not form a coalition with the so called extreme right party of the AfD.

This would have seemed the most likely coalition, based on the similarities between the two parties’ agendas. Both want to curb illegal immigration and move away from restrictive renewable energy policies.

Yet, the leader of the CDU/SPU alliance has repeatedly stated that they will not work with the AfD.

The only other possibility remains an unlikely 3-way alliance by the socialist and green parties. While all 3 parties are more friendly towards the EU, they have striking differences in important policies.

DAX Live Chart

[[DAX-graph]]

 

Investor Belief in Stability and ECB Policy

The DAX would likely benefit from political stability, even if there is little change to immigration or energy policy.

However, it seems baffling that the market may see a right-left wing government alliance as stable. The Greens have been pushing for restrictive renewable energy policies, and the socialists have played along.

Both left-wing parties have been soft on illegal immigration also. The stance of these two parties is unlikely to change, while the CDU has made promises, and it seems they would have a hard time justifying a change in policy.

ECB policy is still the main driver of higher valuations for the DAX, and that may help. But at some point the central bank will stop cutting rates, and the focus will remain on government policies.

I see high chances of a highly unstable government in 2025, as the CDU/SPU will need the votes of the AfD if it wants to implement its policies. At the same time that may cause its allies in government to pull their backing.

DAX Ponders Upcoming General Election, Ukraine-Russia Peace Deal

Posted on by Gino Bruno D'Alessio

The German stock market took a pause of reflection this morning trading almost flat on the day, as the general election approaches.

dax halts decline ponders election on sunday

  • General election expected to provide new government
  • Investors see possibility of peace deal
  • Hopes for cheaper energy and a trade deal boost confidence

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

[[DAX-graph]]

 

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.

DAX Recovers Some of Yesterday’s Losses Due to Fed Minutes as Trade Tensions Ease

Posted on by Gino Bruno D'Alessio

FOMC minutes indicated a more cautious approach from the Fed going forward. Trade tariff woes ease as the EU trade chief opens to talks.

DAX recovers from yesterday's lows

  • FOMC minutes reveal Fed may take longer to lower rates.
  • The EU trade chief opens up to talks on tariffs

The [[DAX]] is up 0.50% this morning after losing 1.96% yesterday. FOMC meeting minutes revealed a more hawkish stance from the Fed. Trump trade tariff threats are seen by many as a negotiating tactic.

FOMC Minutes Knocked DAX

The minutes showed that some Fed officials raised concerns about continuing to unwind the balance sheet. The main preoccupation is how the Treasury plans to handle cash and bond issuance.

The officials were concerned that it was not possible to determine if the market would have too little or sufficient liquidity.

The preoccupation puts a spoke in the wheels of quantitative tightening (QT) as the Fed looks to unwind its treasuries holdings.

The selling of bonds and treasuries on the central bank’s balance sheet may come to a pause. Atlanta Fed Chief Bostic stated last week that QT may be getting close to levels where it can stop.

DAX Live Chart

[[DAX-graph]]

 

DAX Gets Some Relieve from EU Trade Commissioner

The EU’s Trade Commissioner, Maros Sefcovic, said that the EU is willing to discuss a trade deal that would be mutually beneficial.

Sefcovic specifically mentioned he would be willing to talk about lowering tariffs on cars and trucks.

Also looking at potentially eliminating tariffs altogether for autos and other goods.

“I will be making this point to my American counterparts when I meet them later today. The EU is interested in making deals – deals that foster fairness, burden-sharing and mutual benefits,” Sefcovic said.

Currently the EU has a 10% tariff on US autos, compared to a 2.5% tariff from the US for EU autos.

The Trump administration has also complained about the sales tax, which is at 17.5%, seen as an indirect tariff.

FTSE Reverses 2-Day Rout Posts a Gain on Calls for Increases in Defense Spending

Posted on by Gino Bruno D'Alessio

Calls from Trump for Europe to spend more on defense have turned UK’s prime minister’s stance on military spending.

ftse reverse rout and posts a gain on talk of expanding defense spending

  • FTSE up 0.76%
  • Defense stocks lead rise in FTSE
  • Lloyds take a hit in car loan miss-selling case

The [[FTSE]] reversed a 2-day down trend on Monday, posting a gain of 0.76% thanks mainly to the talk of expanding defense spending in Europe. The UK Prime Minister stated that the country needed to do more for its defense against external threats.

Defense Stocks Lead the FTSE Higher

Aerospace and defense stocks were the lead gainers, with the sector index gaining 4.5% on Monday. BAE, a UK defense company, led the blue-chip FTSE by rising 9% as defense stocks across Europe rallied.

PM Keir Starmer stated that the UK was facing a generational change and that all of Europe needed to spend more on defense.

The EU Commissioner Ursula von der Leyen has proposed exempting defense spending from the government budget limits.

The change in direction on military spending comes after Trump and other White House officials called on European members of NATO to ramp up military expenditure.

FTSE Live Chart

[[FTSE-graph]]

 

Banks and Lenders Take a Hit in Suit Over Miss-Selling Car loans

The court case the banking industry is facing over miss-selling car loans may have put a dent in the banking sector’s performance. However, the FTSE as a whole is managing to keep its ground.

The UK Supreme Court ruled that Rachel Reeves, UK Treasury Minister, would have no say in a court case against banks and lenders regarding car loan miss-selling.

Lloyds was one of the banks most affected as it has a specific car loan business. The stock dropped nearly 2% after the news.

The news adds to the bank’s woes since it’s already facing a £1 billon tax bill related to a dispute over tax relief during the bank’s rescue of the bank HBOS during the 2008 crisis.