ewsba.se
The German stock market has a lot going for it right now, with lower oil prices and a broadening rally from software to chemicals and consumer stocks powering the country’s shares.
After underperforming most European and benchmarks in 2026, the DAX has rallied 6% to a record high this quarter. Falling oil prices have done most of the heavy lifting, benefiting the energy-intensive firms that make up about a third of the index. The scare in the artificial intelligence trade has been a boon for software stocks such as S SE, which accounts for about 12% of the DAX’s weight.
“The DAX has benefited from its cyclical sector mix, particularly its high technology exposure, where the combination of software and hardware has provided some protection,” said Deutsche Bank AG strategist Carolin Raab. “The relatively low exposure to traditional energy and basic resources has also helped.”
The rally has been broadening fast, with about 80% of DAX members trading above their 200-day moving average and 18% making fresh 52-week highs just this week. Only the ultra-defensive Swiss SMI is seeing stronger momentum among major European benchmarks. In last month’s Bank of America Corp. fund manager survey, Germany was the second-most preferred market in Europe, with a net 16% of investors intending to overweight its stocks in the next year.
Bloomberg Intelligence strategists led by Laurent Douillet said local conditions have historically had little influence over the DAX, given that its members generate only 15% of sales domestically. That relationship now appears to be changing, with US and German PMIs becoming more significant at the expense of Chinese indicators. The strategists expect 16% forward 12-month earnings-per-share growth versus 13.4% consensus, supported by AI capital spending, higher defense outlays, financials and a recovery in Germany’s economy.
Germany’s fiscal stimulus has started to kick in, and UBS Group AG economists expects it to add about 60 basis points to economic growth in both 2026 and 2027. Yet, a UBS basket of stocks geared to German fiscal spending is trading at a 20% discount to the Stoxx 600, the largest in more than two years.
“Orders now rolling in Germany’s fiscal package is no longer a promise,” said UBS strategists Gerry Fowler and Sutanya Chedda. “It is being spent, and the laws needed to speed it up are in place.”
Defense stocks have been the initial beneficiaries, the strategists said. Among non-defense names, there is a fairly strong positive correlation of 0.6 between German revenue exposure and the latest earnings revisions. Stocks deriving at least 30% of sales from Germany saw earnings estimates revised higher in September by a median of 2.1%, compared with 0.5% for the rest. These include Friedrich Vorwerk Group SE, Strabag SE, Deutz AG and Nordex SE.
While investors have preferred large companies, their valuations look expensive compared with small and mid-caps, which likely are the major beneficiaries of fiscal spending. Mid-caps and domestically focused names are lagging as investors wait for the impact of the stimulus on earnings, a process that has taken longer than anticipated. A misallocation of funds may be one reason, with local authorities having some discretion over disbursements.
“Fiscal spending should help structurally, though patience is required amid gradual execution, with defense doing the heavy lifting for now,” said Barclays Plc strategists led by Emmanuel Cau.
With business optimism on the rise, it could be just a matter of time before investors step in. The Ifo business climate index rose to its highest since 2023 in October, while manufacturers’ sentiment balance turned positive for the first time in more than three years.
“Early signs of a German recovery in the Ifo and economic activity trackers, progress on fiscal stimulus and initial evidence of spending feeding into corporate order books should encourage investors to increase exposure,” Deutsche Bank’s Raab said. Meanwhile, the MDAX has even “more room for upside if the recovery gains traction.”
This article was generated from an automated news agency feed without modifications to text.
Catch all the Business News , Market News , Breaking News Events, JIO IPO Listing Today LIVE and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.