After a steep drop the previous day, the DAX rebounded strongly on Wednesday, erasing its losses. A major financial package proposed by the CDU/CSU and SPD lifted market sentiment, driving significant gains in infrastructure stocks like Heidelberg Materials and Siemens Energy. Bitcoin also showed signs of recovery.
Strong Market Comeback
The DAX surged in response to the announcement of a historic financial package from the CDU/CSU and SPD. Within the first hour of trading, Germany’s leading index climbed back above 23,000 points, a level it had surpassed for the first time earlier this week. Although it didn’t set a new record, the index still recorded a solid 3.7% increase, closing at 23,152 points.
Mid-cap stocks saw an even bigger rebound, with the MDAX jumping 6.26% to 29,973 points. The Eurozone’s benchmark index, the EuroStoxx 50, also gained 1.7%. Despite recent market turbulence, both the DAX and EuroStoxx 50 have maintained double-digit gains since the start of the year, unlike major U.S. stock indices, which have seen sharp declines.
A Game-Changing Financial Package
The planned special fund for infrastructure and increased defence spending—bypassing Germany’s debt brake—acted as a powerful economic stimulus, according to portfolio manager Thomas Altmann of QC Partners. “Many industries and companies are now looking forward to major government contracts,” he said.
On Tuesday evening, CDU/CSU and SPD, currently in coalition talks, unveiled their ambitious financial plan. The package includes easing the constitutional debt limit to allow for higher defence spending and creating a €500 billion fund for infrastructure upgrades. However, securing the required two-thirds majority in the Bundestag will require backing from either the Green Party or the FDP. Time is also a factor, as the newly elected Bundestag must convene by the 30th day after the February 23rd election. This presents an additional challenge, as the AfD and BSW together hold a blocking minority against constitutional amendments.
U.S.-Ukraine Relations Show Signs of Improvement
Meanwhile, following tensions at the White House, there are signs of a thaw in relations between U.S. President Donald Trump and Ukrainian President Volodymyr Zelensky. In a speech before both houses of the U.S. Congress, Trump hailed his administration’s achievements as unprecedentedly successful. However, key topics such as Russia’s invasion of Ukraine and trade disputes with Canada and Mexico received only brief mentions.
Market Trends and Volatility
On Monday, a surge in defence and automotive stocks had propelled the DAX well past the 23,000-point mark for the first time in its history. But fears of a global trade war triggered a sharp sell-off just a day later, leading to the index’s biggest single-day decline in three years. Despite this, financial analyst Martin Utschneider of Finanzethos believes that the long-term upward trend remains intact.