Arms prices in Germany and the price index for Dax reach unprecedented peak levels.
United States-EU Tariff Respite and Russia Sanctions Threat Boost German Dax
yesterday, the German Dax index reached a record high of 24,230 points, buoyed by the temporary tariff reprieve granted by President Donald Trump towards the European Union (EU) and hints of new sanctions against Russia. The benchmark index has climbed 22% so far this year, and at midday, it traded at 24,226 points, up 0.8% from the previous day. The Euro Stoxx 50 also increased by 0.5% to 5,422 points.
Remarks by Trump and German Chancellor Friedrich Merz drove defense stocks, with particular emphasis on Rheinmetall and Hensoldt. Trump's comments, perceived as a sign of stronger US engagement on Ukraine's side, bolstered defense stocks. Merz underscored the need for Germany to prepare for a prolonged conflict in Ukraine, advocating for increased efforts to strengthen Ukraine's defense. Consequently, Rheinmetall hit a new all-time high of 1,886.50 euros, and Hensoldt surged to record levels. By midday, Rheinmetall was trading at 1,884 euros, up 2.3%, while Hensoldt stood at 84.60 euros, an increase of 3.3% from the previous day.
Artnet's stock soared by 18.5% to 11.20 euros, nearing the level of an acquisition offer from an investment company offering 11.25 euros per share. During Tuesday's trading session, Artnet's stock touched a record high of 11.40 euros. The company supports the acquisition offer, aiming for a delisting.
The US dollar strengthened minimally on the foreign exchange market. The dollar index, which measures the US currency's performance against the six major partner currencies, rose by 0.3%. The euro, which had gained following Trump's announcement of the delay in tariffs against the EU, witnessed a 0.3% decline to 1.1349 dollars.
The price of the main oil grade, Brent Crude, ascended by 0.2% to 64.88 euros. Market participants await an online meeting of the OPEC+ oil ministers tomorrow and a meeting of the eight member countries on Saturday, where an expansion of production could be agreed upon.
Should a peace settlement be reached or if Ukraine rejects US-backed terms, there could be a reduction in US military commitments in Europe and a warning that aid could be withdrawn. This scenario could lead to negative implications for European defense stocks if uncertainty or reduced demand for European defense products ensues.
Relevant background information indicates that the US is a crucial player in shaping peace terms, providing military, intelligence, and economic aid, as well as imposing sanctions against Russia. The goal is to alter Russia's cost-benefit analysis, making continued aggression less attractive, while maintaining the option for a reasonable compromise. The market generally views ongoing US engagement as beneficial for defense stocks, as it signals sustained military spending and demand for defense systems. Any perceived weakening of US support or movement toward early peace negotiations could introduce volatility.
The temporary tariff reprieve granted by President Trump towards the EU and the threat of new sanctions against Russia have increased the already climbing German Dax index, impacting the overall finance and business sectors. Remarks by Trump and German Chancellor Friedrich Merz have raised the value of defense stocks, particularly Rheinmetall and Hensoldt, emphasizing the significance of the industry in the given context.
