Dark Friday sees an upsurge in Dax's performance
German Stock Market: A Cautious Recovery Amid Geopolitical Risks
The German stock market, specifically the DAX index, has witnessed a significant recovery in 2025, with the index up approximately 20.1% year-to-date. This trend is underpinned by substantial corporate investment pledges totaling over €630 billion by 2028, reflecting increased confidence and government stimulus efforts.
The EuroStoxx 50, representing a broader European blue-chip basket including German companies, has also risen but at a more moderate pace, tracking a 9.4% gain for the broader STOXX Europe 600 index in the same period.
Key factors driving this recovery include strong consumer resilience in Germany, government and corporate stimulus initiatives, improving economic sentiment, and easing trade tensions and geopolitical uncertainties.
The resilience of German consumers is evident in a 1.0% monthly and 4.9% yearly rise in retail sales as of June 2025, signaling robust internal demand despite uneven sector performance. The 'Made for Germany' investment plan, involving 61 major firms committing large capital investments to innovation and competitiveness, is another significant stimulus initiative.
The improving economic sentiment is further underscored by the ZEW Indicator for Germany reaching a positive 52.7 points in July 2025, showing heightened optimism among experts about near-term growth despite current challenges like trade conflicts.
The broader European equity markets, including EuroStoxx 50, are benefiting from these factors, as well as easing trade tensions and geopolitical uncertainties, which had weighed on markets earlier in the year but now appear to have peaked.
However, the recovery is not without its challenges. Capital market strategist Jürgen Molnar of RoboMarkets believes the overall trend is likely to remain downward, citing potential risks from geopolitical uncertainties, inflation variability, and industrial sector volatility.
Investors are advised to monitor developments in trade policy and global relations, as these remain key risks that could impact industrial output and equity market performance.
Despite recent losses, the Dax is still up around 18% for the year. Key events in the German stock market include Stabilus reporting a nearly 10% drop in revenue in the three months to the end of June, leading to a 10% tumble in its shares at the start of trading. However, the Dax partially recovered at the start of the week, rising by 1.4% to 23,749 points on Monday.
Other notable events include Barclays upgrading Lufthansa to "overweight", citing a more favorable outlook for the airline industry. Deutsche Bank's shares rose by 2.4% following the EBA stress test results, indicating that banks were the most popular among investors across Europe due to the positive outcome of the test.
Kepler Cheuvreux issued a "buy" recommendation for TeamViewer, seeing an attractive risk-reward ratio in the shares. The Eurozone's leading index, the EuroStoxx 50, gained 1.2%, while the Dax dropped by 2.7% on Friday.
Stabilus now expects results for the current fiscal year to be at the lower end of its respective guidance ranges. Commerzbank's shares increased by 2.1% following the EBA stress test results.
In summary, the German stock market (DAX) shows a robust recovery trend in 2025, supported by strong corporate investment pledges and improving economic indicators, while the EuroStoxx 50 reflects steady gains amid broader European optimism. The outlook is cautiously positive but subject to geopolitical and trade-related risks.
The recovery of the German stock market is being driven by substantial investments within the business and finance sectors, such as the 'Made for Germany' plan with €630 billion pledged by 61 major firms. However, analysts like Jürgen Molnar warn of potential risks from geopolitical uncertainties, industrial sector volatility, and inflation variability that could impact the industry and overall market performance.
