German business – DAX max

A stockmarket milestone reflects optimism for German companies

ECONOMIC growth of 2% this year, as is expected in Germany, is hot stuff only in the context of Europe’s cool climes. But the DAX index of the country’s biggest listed companies is truly sizzling, closing above 10,000 points for the first time on Monday June 9th, up by 22% on a year ago and nearly treble the low it hit in March 2009. The MDAX, an index of somewhat smaller companies, has performed even better. Share-traders’ enthusiasm is shared by bosses: the Ifo business-climate index, a widely watched survey of companies, shows an optimism not seen since 2011.

What justifies the cheer? Dirk Müller, a trader and commentator, although cautious about the heights share prices are reaching, thinks the prospects for Germany’s carmakers are bright. Two of them, BMW and Volkswagen, have been among the top-five performers over the past five years, and the DAX’s best performer has been Continental, a car-parts maker.

In recent years the run-up in German automotive and engineering firms’ shares has been driven by booming emerging-market sales. Now, China’s market is cooling, and the prospects for sales in Russia have been dampened by its confrontation with the West over Ukraine. However, markets closer to home are coming to the rescue: car sales in Europe have increased for eight months in a row. Volkswagen, which sold 4.4% more cars in the first five months of 2014 than in the same period last year, says western Europe is now only second to the Asia-Pacific region in sales growth, a big change from recent years.

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