The FTSE may have recently seen a record high – but London is not the only European stock market where share prices have soared since the start of the year.
Frankfurt’s DAX 30 has also traded at record highs and investors seem to have an appetite for even more German stocks and shares.
Financial experts believe three main factors are influencing confidence in the DAX –
- The German economy is the only glimmer among an otherwise disappointing recent performance from the Eurozone. Growth was 1.6% last year against all adversity
- The European central Bank has a massive quantitative easing program underway aimed to stoke the Eurozone economy and boost inflation, making borrowing and exports cheaper
- The falling euro helps German companies more than any other in the Eurozone as they are the biggest exporters already – brands like Mercedes Benz, BMW and Volkswagen lead the way
With the euro shedding around 12.5% of value against the US dollar already this year, the exchange rate is down to $1.05 and 1.4 to the pound.
If Germany does not take an investor’s fancy, then other markets posting a 15% plus increase this year include France, Ireland, Italy and Argentina. The first three will also benefit from QE in the Eurozone.
China slashes interest rates
Elsewhere, The People’s Bank of China has slashed rates for the second time this year in a bid to put the brakes on falling inflation.
The 12-month official borrowing rate is 5.35%. Deposit rates were also shaved by 25 basis points.
The bank issued a statement explaining the rate cut was not a policy change but an adjustment to keep the economy on track.
“The government wants to keep interest rates sustainable for helping economic growth, keeping down prices without going into deflation and helping employment,” said a spokesman.
“This is not any change in monetary policy in the short or long term.”
Investors seem in two minds over the decision.
After the first rate cut, the Chinese stock market leapt up by 26%, but this time round saw little change.
Reuters reported the rate cut was less than the market expected – many traders and investors expected at least a 50 basis point reduction.
Chinese factory gate figures show that the economy is slowing for the first time in 24 months.
