Stock market surge following election conclusions, with DAX leading the charge.
In the wake of Germany's federal elections, the nation's leading index, the DAX, might witness a potential rally. Despite posting double-digit gains since the start of the year, the index currently remains almost unchanged, with 22,303 points. The European counterpart, the Euro Stoxx 50, is even down 0.75 percent, standing at 5,433 points.
Amongst the stocks that could particularly benefit from the election results is the MDax, which comprises mid-sized companies. The index gained 2.2 percent in the afternoon, currently increasing by 1.22 percent, to 27,835 points. The MDax had previously underperformed the DAX due to its dependency on Germany's economy, which has suffered more in light of economic downturn compared to globally positioned companies in the DAX. With Germany's economic recovery hopes on the rise, mid-sized and smaller companies could experience growth. Ulrich Kater, chief economist of DekaBank, remarked that the election result will support the initial recovery trends in the German economy.
The new government, with the CDU/CSU and a likely two-party coalition with the SPD, may be ready to form as early as Easter, which increases the chances of improving economic framework conditions and stable political relations. However, the mood in the German economy remained skeptical in February, as indicated by the unchanged Ifo business climate index at 85.2 points. The further development is likely to depend on how the coalition negotiations progress in the coming months, said Thomas Gitzel, chief economist of VP Bank.
A notable decline is observed in the shares of Siemens Energy, the bottom spot in the DAX. Concerns about Microsoft's investments in data centers in the field of artificial intelligence (AI) are behind the significant losses. According to sources, the software giant Microsoft has started cutting back on its AI data center leasing, with reports suggesting a few hundred megawatts of data center capacity being terminated in the U.S. This raises questions about the company's future AI expansion plans. As beneficiaries of the immense power demand of such centers, Siemens Energy and Schneider Electric might be adversely affected. Microsoft initially announced that it expected to spend around $80 billion on AI data centers in the current fiscal year. However, shares of Nvidia, the ultimate beneficiary of AI, recovered slightly in pre-market U.S. trading, somewhat mitigating the news. Microsoft's shares also saw a half-percent increase.
In other industrial news, Rheinmetall AG shares have demonstrated strong performance due to increased defense spending, which is a priority in the new coalition government's agenda. Analyst Sven Weier of UBS has upgraded Rheinmetall shares to "Buy" with a raised price target of 1,208 euros.
Some stocks within the DAX that could potentially benefit from the election results include defense and industrial companies like Rheinmetall AG, infrastructure and renewable energy companies, and healthcare and medical technology firms. However, the exact impact will depend on the progress of coalition negotiations, the government's policy decisions, and various market dynamics.
[Sources: dpa-AFX, Bloomberg News]
In light of the anticipated recovery trends in the German economy following the elections, investors might considerfinance opportunities in mid-sized and smaller companies, such as those in the MDax index, which gained 1.22 percent and could potentially benefit from improvements in economic framework conditions and stable political relations. Conversely, shares of Siemens Energy, a key player in the DAX, are currently under pressure due to concerns about Microsoft's investments in AI data centers, potentially adversely affecting companies like Siemens Energy and Schneider Electric that benefit from these centers' immense power demand.
