The DAX Index has jumped in the past few weeks and is hovering at its highest point on record. It rose to a record high of €24,320, up by over 30% from the lowest point in April this year. This article looks at some of the top companies driving the German DAX this year, and what to expect ahead of the European Central Bank (ECB) decision.
ECB interest rate decision
The upcoming ECB interest rate decision will be the top macro event to watch this week. Economists predict that the bank will deliver its eighth interest rate cut of the cycle, a move that will bring the official cash rate to 2%.
The bank is in a cutting cycle since European inflation has fallen close to the 2% target, while analysts expect that some economies will start to slow because of Donald Trump’s tariffs. Some analysts also believe that the ECB will also deliver another rate cut either in September of December. In a note, an analyst told Bloomberg:
“It’s very possible that the macro picture warrants near-term cuts to support the economy through this period of uncertainty, but that higher rates are needed further out assuming other policy levers such as fiscal come into play.”
Interest rate cuts have made German stocks more attractive as bond yields fall. Data shows that the ten-year German yield has dropped to 2.5% from the year-to-date high of 2.93%. Similarly, the five-year yield has dropped from 2.6% to 2.060%, its lowest point since May 8.
Read more: ECB rate cuts: will this be enough to revive growth in the Eurozone?
Trade concerns remain
The other catalyst for the DAX Index is the changing dynamics on trade. Trump has said that the US would impose a 50% tariff on imported steel and aluminium, a move that will affect some German companies.
He has also threatened to impose a 50% tariff on European goods entering the United States, starting from Germany. Such tariffs will happen if the two sides will not have a deal by July 8. A 50% tariff would effectively block most European goods like vehicles to the US.
Meanwhile, the US and China are not doing well. Last week, Trump warned that China was violating the terms of the deal reached in Switzerland last month, citing its blockade of rare earth metals.
China responded on Monday morning, saying that the US was also violating terms of the deal. It has pointed to the recent announcements of chip controls and the planned revocations of Chinese student visas.
Top DAX gainers of the year so far
Many DAX Index companies have jumped so far this year. Rheinmetall’s share price has surged by over 200% in the first five months, while Commerzbank, Siemens Energy, Deutsche Bank, and Heidelberg Materials have all soared by over 50%.
Some of the other top gainers this year are companies like Bayer, Deutsche Boerse, Continental, and Allianz.
On the other hand, Porsche’s share price has crashed by 27% this year because it is the most exposed to US tariffs. The other top laggards are firms like Merck, Henkel, Siemens Healthineers, and Adidas that have plunged by over 8%.
DAX Index technical analysis
DAX chart by TradingView
The daily chart shows that the German DAX Index peaked at a record high of €24,320 in May and then pulled back slightly to €24,000. It remains above the key resistance level at €23,425, its highest point in March this year.
The index has remained above the important support at €23,425 and all moving averages. Therefore, the most likely scenario is where it falls and retests this support level and then resumes the uptrend, potentially to the resistance at €25,000.
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