Surge in European Investments Observed
Adapting DAX Amid US Tariffs and Fed Rate Cut Expectations
The impact of US tariffs on European stocks, particularly the DAX index, has been significant but appears to be stabilizing in 2025. The DAX, a stock market index for Germany, experienced volatility and trading volume declines amid earlier trade tensions. However, recent developments show a structural adaptation with sectors like utilities and pharmaceuticals outperforming defensively, while industrials pivot towards electric vehicles, automation, and reshoring strategies to offset trade disruptions.
The European Central Bank's easing policies, including rate cuts and targeted longer-term refinancing operations (TPI), have stabilized the DAX. Additionally, the depreciation of the euro, partly influenced by divergent monetary policies between the Fed and ECB, has boosted earnings for exporters in the index. This combination suggests that anticipation of easing US monetary policy or a Fed rate cut generally supports European equities by improving liquidity conditions and competitiveness.
Allianz, a prominent German financial services provider, saw its shares in demand, gaining ground. Many investors are now betting on a near monetary easing by the U.S. Federal Reserve, which is boosting sentiment. Conversely, Carl Zeiss Meditec's financial results were not well received, resulting in a stock decline by double digits at one point during the day.
Despite worries about a recession just a few days ago, many investors are now optimistic about the potential for monetary easing by the U.S. Federal Reserve. This optimism, coupled with the sustained hopes for a rate cut at its September meeting, sparked a buying spree, with investors continuing to watch the ongoing quarterly earnings season.
Notably, U.S. President Donald Trump implemented higher tariffs on imports from several countries, effective Thursday, 06:01 AM CEST. However, the buying spree was not deterred, as the U.S. tariffs did not seem to discourage investors from buying European stocks, including those in Frankfurt. Siemens' earnings were well received, causing the stock to close in the green, while shares of Deutsche Telekom and Merck fell as investors reacted to their earnings reports.
Rheinmetall, another German conglomerate, experienced a sharp stock decline, despite recording record revenue in its ammunition business in the second quarter. The overall numbers fell short of analyst expectations, highlighting the need for continued adaptation and strategic pivots within the industry.
In conclusion, the DAX is adapting structurally to the impacts of US tariffs and monetary expectations, with tactical positioning emerging among investors. Defensive sectors and exporters benefit in the current environment, buoyed by currency effects and policy measures. The market remains nuanced and dynamic, requiring careful consideration and strategic positioning from investors.
[1] Source: Financial Times, 2025.
- The optimism surrounding the potential for monetary easing by the U.S. Federal Reserve, coupled with the sustained hopes for a rate cut at its September meeting, has resulted in a higher demand for Allianz, a German financial services provider.
- In the current environment, with currency effects and policy measures boosting earnings for exporters, the DAX's adaptation to US tariffs includes strategic positioning by investors, with defensive sectors like utilities and pharmaceuticals outperforming, while some exporters see gains in their shares, such as Siemens whose earnings were well received.
