Category: Stock Market

The market is widely expecting the ECB to cut rates by 25 basis points, Siemens Energy Jumps on earnings.

The [[DAX]] opened up 0.63% on the day as investors gain confidence in a positive outcome of the trade tariff negotiations. The index is led by a surge in Siemens Energy.

ECB Interest Rate Cut & Trade Balance

The DAX has been outperforming most peers despite 2 years of contracting GDP Growth. DAX stocks are heavily reliant on trade, as seen in the large trade surplus.

Exports account for around 47% to 50% of German GDP, it’s largest trading partners being the USA and China.

Trade tariffs are, therefore, a large concern for DAX investors. The ECB can help with its monetary policy by cutting interest rates.

Lower interest rates should weaken the euro and offset trade tariffs. A 25% trade tariff would be easily offset by a decline in [[EUR/USD]] of an equal proportion.

At today’s meeting the market has discounted a 25 bp cut in interest rates, from 2.65% to 2.40%. I doubt there will be any surprises, and what may cause volatility is the forward guidance from Lagarde at the press conference.

Siemens Energy & Tariff Concerns

Siemens Energy released earnings yesterday showing its best profit margins since Siemens AG spun off the business in 2020.

Second quarter profits increased more than 5-fold to €906 million, for a profit margin of 9.1% compared to forecasts of 6.2%.

The company raised its outlook for fiscal year 2025 to 4%-6% from 3%-5% previously.

Siemens Energy stocks were up over 11% this morning leading the DAX higher, the next best performer is Zalando up only 0.62%.

Investors are still weighing the possibilities of trade negotiations taking a positive turn. The best scenario I see would be the elimination of tariffs bilaterally.

Adding the ECB rate cut to the mix would then allow for further trade-fueled momentum for the DAX