The German economy – the fifth largest economy in the world and Europe’s largest – is a leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly skilled labor force. Composition of the GDP on the expenditure side: household consumption (55 percent), gross capital formation (20 percent, of which 10 percent in construction, 6 percent in machinery and equipment, and 4 percent in other products) and government expenditure (19 percent). Exports of goods and services account for 46 percent of GDP while imports account for 39 percent, adding 7 percent to total GDP.
German stocks edged lower on Thursday as investors awaited Fed Chair Jerome Powell’s Jackson Hole speech for hints of the bank’s strategy on inflation and monetary policy. Analysts expect that Powell will outline dovish measures including a move toward average inflation targeting in which inflation above the central bank’s usual 2 percent target would be tolerated and even desired.
Rising U.S.-China tensions over the South China Sea also remained on investors’ radar.
The benchmark DAX slid 35 points, or 0.3 percent, to 13,155 after climbing 1 percent the previous day.
Banks led losses, with Commerzbank declining 1.6 percent and Deutsche Bank falling 0.7 percent.
The stock market is the great performer of the health crisis, and the DAX index is no exception. Despite high unemployment and uncertainty, the funds keep pouring in the stock market.
The massive monetary and fiscal stimulus did help. Unlike the Great Financial Crisis in 2008-2009, this crisis benefited from strong fiscal support. Governments from all over the world stepped up to the challenge and pumped money into private and public companies.
Germany was no different. Fortunate enough to run a large fiscal surplus for many years before the pandemic, Germany had the ability to spend massively. One side effect? Higher DAX index, as inflows in the German stock market, reached record levels in 2020.
Biggest DAX Index Inflows Since 2007
2020 brought the stock market frenzy to Germany too. If during the 2008-2009 Great Financial Crisis the German stock market fell to below 4,000 points, this time threatens to break to new all-time highs.
The European Union’s announcement of joint debt sharing was cheered by investors. The news made the Euro, and Euro assets attractive as funds from all over the world diversified their portfolios.
As such, the inflows in the German stock market reached the biggest size since 2007 – almost EUR14 billion in Q1 alone. Despite the Wirecard mess (i.e., Wirecard filed for insolvency after it was proved that it forged its financial statements), investors keep their faith in the German stock market.
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