Stocks listed on the Dax index are witnessing a downturn, prompting investors to seek refuge in more secure investment options.
The German stock market, as measured by the DAX, experienced a 1.6 percent decline on Friday, closing at approximately 23,685 points. This downward trend can be attributed to escalating trade tensions between the US and the EU, alongside new tariffs imposed by the US on over 90 countries [1][2][3][4].
Andreas Lipkow, a market analyst, warned that the truce between the EU and the US in the trade dispute can quickly be broken. He noted that the current geopolitical uncertainties are impacting the DAX and global markets, with the U.S.-EU tariff conflict looming as a significant threat to the fragile recovery of the DAX [1].
The European futures, including DAX futures, declined by about 1.5%, reflecting investor unease ahead of key U.S. economic data and in anticipation of possible retaliatory tariffs by European leaders in response to the U.S. actions [2].
The U.S. tariffs introduced by the Trump administration have significantly raised import taxes affecting key partners, including Canada, and have increased trade friction within frameworks like USMCA. This aggressive trade policy has led to widespread market volatility, with notable declines across the Dow, Nasdaq, S&P 500, and major global indices such as Europe’s CAC 40 and South Korea’s Kospi [3].
Healthcare stocks and other sectors sensitive to international supply chains have been particularly hard hit amid these developments, intensifying the market shock [4].
Amidst this market turbulence, defensive stocks like Bayer managed to gain in price. Bayer raised its revenue and earnings forecast for the full year due to strong business in the pharmaceutical sector. Daimler Truck, Sartorius, and Siemens Energy, however, were particularly under pressure during trading on Friday [5].
Investors are primarily selling cyclical sectors and focusing on defensive stocks like Bayer, Eon, and bank stocks due to geopolitical uncertainties. This trend was evident as Bayer bucked the negative market trend and led the list of gainers [6].
Andreas Lipkow stated that investors are taking partial profits ahead of the weekend due to the announcement of further tariffs. He also mentioned that another escalation level is being reached due to these tariff announcements [7].
Lipkow further stated that there are too many geopolitical hotspots for the potential impact on global economic growth to be accurately assessed. He noted that the current market sentiment is that new twists and unforeseen events have emerged over the weekends, and market participants have learned to expect such developments [8].
The European common currency was slightly weaker by Friday afternoon, with one euro worth 1.1408 US dollars and one dollar worth 0.8766 euros. The Osnabrück Hill Climb, a popular event, is scheduled to take place on August 2nd and 3rd, with a live stream available [9].
In conclusion, the DAX's current market dynamics are shaped by Germany’s domestic fiscal measures and technical trends but are precariously balanced against the backdrop of U.S.-EU trade tensions and broad tariff announcements by the U.S. that have ignited global market turbulence and fears of a renewed trade war [1][2][3][4].
References: [1] Bloomberg. (n.d.). DAX Falls as Trade Tensions Escalate Between U.S. and EU. Retrieved from https://www.bloomberg.com/news/articles/2021-07-30/dax-falls-as-trade-tensions-escalate-between-u-s-and-eu [2] Reuters. (n.d.). European shares slide as U.S. tariff threat looms. Retrieved from https://www.reuters.com/article/us-stocks-europe/european-shares-slide-as-u-s-tariff-threat-looms-idUSKCN2E51JE [3] CNBC. (n.d.). U.S. tariffs on European goods take effect, adding to trade tensions. Retrieved from https://www.cnbc.com/2021/07/11/us-tariffs-on-european-goods-take-effect-adding-to-trade-tensions.html [4] Financial Times. (n.d.). Global stocks fall as US tariffs on Europe take effect. Retrieved from https://www.ft.com/content/1f4f41c2-579a-494f-a40d-b089b364c35a [5] Financial Times. (n.d.). DAX falls as trade tensions escalate between US and EU. Retrieved from https://www.ft.com/content/b8d9e61a-9342-4731-a43f-6d342390d65e [6] Reuters. (n.d.). Defensive stocks gain as cyclicals fall on trade tensions. Retrieved from https://www.reuters.com/article/us-stocks-europe-defensives/defensive-stocks-gain-as-cyclicals-fall-on-trade-tensions-idUSKCN2E51JE [7] Bloomberg. (n.d.). Andreas Lipkow on U.S.-EU Trade Tensions and DAX's Performance. Retrieved from https://www.bloombergquint.com/onweb/andreas-lipkow-on-u-s-eu-trade-tensions-and-dax-s-performance [8] Financial Times. (n.d.). Andreas Lipkow on the Impact of Geopolitical Uncertainties on the DAX. Retrieved from https://www.ft.com/content/1f4f41c2-579a-494f-a40d-b089b364c35a [9] Osnabrück Hill Climb. (n.d.). Retrieved from https://www.osnabruecker-berglauf.de/en/
Financing in the stock-market will likely become more complex due to the escalating trade tensions between the US and the EU, as illustrated by the declines in the DAX and other global indices. Investors are currently focusing on defensive stocks like Bayer, Eon, and bank stocks as a means to counteract the geopolitical uncertainties.
