London
CNN
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Germany’s benchmark stock index opened at an all-time high on Wednesday as investor confidence grew. interest rates will be lowered soon That outweighs concerns that the country is heading into a recession.
The day before, the DAX had closed at a record high of 16,533 points, but that high was set to be broken at the start of trading on Wednesday. By 11:46 a.m. ET, the DAX was up 0.9% on the day to 16,679 points.
The index, made up of the 40 most valuable companies in Europe’s largest economy, has been rising more or less steadily since late October. Official estimates at the end of the month showed that inflation rates in the 20 countries that use the euro had slowed sharply, reaching their lowest level in more than two years.
The price rises that pushed the European Central Bank into an unprecedented cycle of rising interest rates eased further in November. reaching 2.4%.
Investors’ hopes that borrowing costs will not rise again rose on Tuesday after ECB board member Isabel Schnabel effectively ruled out further rate hikes, citing a “significant” drop in inflation.schnabel told Reuters The central bank is on track to cut inflation to its 2% target and said it was “very unlikely to raise rates further.”
Lindsey James, investment strategist at Quilter Investors, said the DAX was supported by “good news on inflation” and noted investors expected the ECB to start cutting interest rates as early as March. did.
In a note, he said recent business research suggesting Europe’s economy may be bottoming out also boosted the index.
closely monitored Survey for purchasing managersA research report tracking the eurozone’s manufacturing and services sectors showed on Tuesday that output shrank in November at a slower pace than the previous month.
Still, the rise in the stock market is due to the following circumstances. vulnerable state Germany’s economy is lagging behind other large regional economies such as France, Italy and Spain. Germany’s gross domestic product (GDP) shrank by 0.1% in the third quarter compared to the previous three months.
As a recent sign of Germany’s problems, official data on Wednesday said industrial orders in Europe’s manufacturing powerhouse fell 3.7% in October from the previous month, disrupting economists’ forecasts for a slight increase.
According to one source, German companies have also “significantly reduced their investment plans” for this year and next. The survey of 5,000 companies was published by the Ifo Institute on Monday.
“The investment environment has deteriorated significantly. This is a result of rising financing costs, weak demand and uncertainty regarding economic policy,” said Lara Zarges, an economist at the institute. press release.
Ben Ritchie, head of developed market equities at investment firm abrdn, offers one explanation for the disconnect between the DAX and the German economy. He told CNN that the index’s constituents’ exposure to the domestic economy is “modest.”
He also cited lower energy prices “supporting profitability” and slower overall inflation as further reasons for the index’s recent strength.
Wednesday’s DAX rally was led by Europe’s largest automaker Volkswagen, whose shares rose 5.4%.
at work the day before Said An independent audit of factories in China, which the company jointly owns with SAIC, found no signs of forced labor. Volkswagen has come under fire over its factories in Xinjiang, where human rights groups have documented the use of forced labor. China denies any abuses.