The DAX index saw a rise towards the end of the week as German business sentiment improved and positive private sector data emerged, boosting investor confidence. The Ifo Business Climate Index went up for the first time in six months, providing a glimmer of hope for the economy.
The German DAX index experienced a 0.2% increase on Friday, driven by growing investor optimism following signs of improvement in German business sentiment and positive signals from private sector activity surveys. The Ifo Business Climate Index, which is closely monitored for German economic confidence and is based on approximately 9,000 business responses, climbed to 86.5 in October from 85.4 in September. This surpassed market expectations and marked the first increase in half a year.
According to the Ifo Institute for Economic Research, German companies are feeling more positive about their current situation, although there is still some caution regarding future prospects. The institute’s president, Clemens Fuest, mentioned that sentiment among companies in Germany has improved, with businesses expressing greater satisfaction with their current situation. However, expectations for the future are mixed with a sense of scepticism. Despite this, there is a belief that the German economy has paused its decline, at least for the time being.
In terms of sectors, the manufacturing sector in Germany, which has faced challenges this year, showed some signs of stability as companies became slightly less pessimistic about future conditions. Although demand for orders remains weak and capacity utilization has fallen, there are indications that the sector’s downturn may have halted. The service sector, on the other hand, experienced more significant improvements with the Business Climate Index returning to positive territory, especially in logistics, tourism, and IT.
The recent PMI surveys also provided some positive news, revealing a faster-than-expected expansion in the services sector and a slower rate of contraction in manufacturing activity in October. However, the overall PMI Composite Output Index remains in contraction, highlighting ongoing pressures on Germany’s economy.
German equities witnessed a mild rally over the past few sessions, with top performers including Daimler Truck Holding AG, Siemens Energy AG, and Puma SE. Despite these gains, the DAX is still down for the week, remaining below its recent all-time high. Looking ahead, market focus is now turning towards major corporate earnings, with Volkswagen AG scheduled to release its quarterly results. Analysts are expecting lower earnings and revenues compared to the same quarter last year, reflecting the challenges faced by the automotive industry.