Munich, December 22 – German stock markets experienced a week of fluctuation but ultimately recorded moderate gains during the last full trading week of the year. While weaker-than-forecast economic data from Germany and profit-taking in some high-performing stocks from 2025 exerted downward pressure, lower-than-expected inflation figures from the US provided a boost. This, combined with mixed US labor market data for October and November (released last week due to government shutdown delays), further fueled hopes for additional interest rate cuts by the US Federal Reserve. The European Central Bank’s (ECB) decision to maintain key interest rates was as anticipated and had no significant impact on the markets. Overall, trading was quiet at times last week, with many large institutional investors reportedly having already closed their books. Talk of a year-end rally largely subsided.
DAX, MDAX, and TecDAX See Modest Gains
The German Stock Index (DAX) advanced by 0.4 percent week-on-week, reaching 24,288.40 points. The MDAX gained 1.3 percent, closing at 30,361.46 points, while the TecDAX moved up by 0.4 percent to 3,566.78 points. In contrast, the m:access All-Share index declined by 0.6 percent, settling at 1,208.58 points.
Banking Stocks Surge, Rheinmetall Dips
Most DAX constituents saw limited percentage swings last week, both upwards and downwards. A notable exception was Zalando, whose shares climbed by 8.2 percent, leading the weekly gainers. Banking stocks were also in demand; Commerzbank shares rose by 4.4 percent, and Deutsche Bank shares also increased by 4.4 percent. Market participants suggest that expectations regarding ECB interest rates likely played a role in this surge. Conversely, Rheinmetall, one of the year’s top performers, saw its shares lose 3.5 percent of their value, attributed to profit-taking and ongoing negotiations for an end to the war in Ukraine.
German Bond Markets Decline
Prices in the German bond markets fell again last week. After a slight increase at the beginning of the week, yields on German government bonds retreated later in the week. Clear impulses were lacking, and the outcome of the ECB Governing Council meeting had virtually no effect on market activity. The yield on the ten-year German government bond rose from 2.85 to 2.89 percent week-on-week. The Umlaufrendite (current yield) also slightly increased from 2.80 to 2.81 percent.
Mixed Performance on US Stock Exchanges
US stock exchanges presented a mixed picture last week. Investors initially held back due to concerns about high valuations of tech stocks, but lower-than-expected inflation figures subsequently improved sentiment. Overall, the Dow Jones Industrial Average decreased by 0.7 percent week-on-week to 48,134.89 points. The broader S&P 500 improved by 0.1 percent to 6,834.50 points, while the technology-heavy Nasdaq-100 gained 0.6 percent, closing at 25,346.18 points.
Outlook: Moderate Gains Expected for Shortened Trading Week
For the current shortened trading week, some analysts anticipate further moderate gains, although the term ‘rally’ is no longer being used – expectations are not that high even among optimists. However, barring any unforeseen significant disruptions, a positive year-end seems likely. The current starting position, characterized by year-to-date price increases, supports this view. Furthermore, the major drivers of this year, Artificial Intelligence (AI) and defense, could continue to provide upward momentum despite recent concerns and profit-taking. Hopes for further interest rate cuts by the US Federal Reserve also contribute to this optimistic outlook.
Significant market movements driven by economic data are not widely expected, even with several important publications due from the US, including new orders, industrial production, and consumer confidence. However, many institutional investors have already concluded their year-end activities, and many other market participants are likely on holiday. This situation creates the possibility that even smaller orders could influence individual stock prices.
Key Dates for the Week Ahead
- Monday, December 22: Chicago Fed National Activity Index (USA)
- Tuesday, December 23: German Import Prices; ADP Employment Report (USA); US Durable Goods Orders; US Industrial Production; US Consumer Confidence
- Wednesday, December 24: Christmas Eve
- Thursday, December 25: Christmas Day (Public Holiday)
- Friday, December 26: Boxing Day (Public Holiday)
Disclaimer: This text is a column from Bayerische Börse AG. The content of the column is not the responsibility of 4investors and therefore does not necessarily reflect the opinion of the 4investors editorial team. All liability and claims are therefore expressly excluded by 4investors!
Source: https://www.4investors.de/nachrichten/amp/boerse.php?sektion=stock&ID=187511
