Examined the alignment of the assistance with the domestic market by the Commission.
US Inflation Data and Trump-Putin Meeting Impact German Stock Market
The German stock market, particularly the DAX index, has been influenced by two significant factors in recent days: the upcoming US inflation data and the announced meeting between US President Donald Trump and Russian President Vladimir Putin in Alaska.
US Inflation and Federal Reserve Policy
Easing expectations and anticipated Fed rate cuts have contributed to a yield differential that favors European equities like the DAX. The market prices in an 85% probability of a 25 basis point Fed cut by September, pushing investors towards higher-yielding German stocks. This dovish US monetary stance contrasts with the European Central Bank’s (ECB) aggressive easing and bolsters DAX gains through capital inflows, even as the euro depreciates against the dollar, enhancing export earnings for multinational German companies.
Trump-Putin Meeting and Geopolitical Developments
There has been a reduction in market anxiety due to perceived progress in Ukraine peace talks and shifts in US foreign policy stance. This geopolitically positive outlook, combined with the EU’s substantial defense spending plan (€800 billion), has underpinned confidence in the DAX, especially boosting defense and tech shares that benefit from this environment. However, geopolitical risks remain unresolved, notably related to the Ukraine conflict, which still pressures energy costs and market volatility.
DAX Performance
In recent trading, the DAX slightly dipped (-0.18%) but remains close to record highs near 24,300 points. From a technical and market sentiment perspective, the DAX is showing bullish momentum with potential for further gains, though immediate resistance lies about 100-150 points above current levels. Many traders are net-short on the DAX, which contrarian views interpret as a sign the index could rise further in the near term.
Summary
The interplay of US inflation-driven Fed policy and geopolitical shifts around the Trump-Putin meeting has strengthened the DAX's performance and outlook in mid-2025. The upcoming US inflation data is expected on Tuesday and is seen as a crucial factor for a possible interest rate cut by the US Federal Reserve in September. The Trump-Putin meeting is scheduled for Friday, and its outcomes could further impact the German stock market.
The upcoming US inflation data might influence the German stock market, potentially impacting the probability of a Fed rate cut by September, consequently drawing investments toward German stocks and strengthening the yield differential. In the realm of technology, EU's substantial defense spending plan, along with perceived progress in geopolitical developments like the Trump-Putin meeting, has bolstered confidence in defense and tech shares within the DAX. Despite some volatility, the technological advancements in these sectors present growth opportunities for German businesses and investors, particularly in the stock-market landscape.
