DAX Posts 3 Consecutive ATHs – Fueled by Shift from Green Power

German stocks continue to rally unfazed by any of the risks affecting European peers. Party coalition leading in the poll pledges to bring back nuclear power.

• Parties leading the polls pledge to make energy cheaper
• Likely to reverse ban on combustion engines by 2035
• Bond yields decline on ECB projections

The DAX posted its third consecutive all-time high today touching 20,765, up just over 2.50% on the week.  The index has gained 4.81% YTD as the rally continues to gain momentum.

Parties Pledge to make Energy Cheaper

Various political parties have pledged they will lower prices as Germany faces election on February 23.

Lower energy costs would no doubt help revive a flagging industry, free up cash for consumers, and positively affect the DAX.

The CDU (Christian Democrats) and allies CSU have promised they will cut energy prices by around 12% of 2024 prices. They also want to consider turning nuclear power back, which the country abandoned in 2022.

The AfD, Germany’s so called far-right party, that all fossil fuel power plants should be kept running. They are also interested in reversing the ban on nuclear power.

DAX Live Chart

DAX

Reversal of Fossil Fuel Car Ban

The same parties also want to stop the ban for 2035 on fossil fuel cars. This particular policy would be particularly beneficial to auto giants such as VW, BMW, or Mercedes who are all struggling to compete with Chinese models and weak demand for electric vehicles.

VW already shut down to German factories, a first ever in the company’s history. Other automakers are reporting lower profits and weak demand.

A withdrawal from the 2035 ban on ICE cars would safeguard jobs and release capital automakers are tying up in attempting to produce viable EV alternatives.

Bond Yields Decline

Bond yields have declined as the run on public debt fades. German 10-year yields reach levels not seen since July 2024 at 2.635% on Tuesday.

The bond market has since rallied as the selloff overflow from US and UK treasuries subsided. The market sees the ECB is on track to cut rates sooner rather than later, and yields are back to 2.50% today.

The current stock market environment is more concerned with ECB policy than economic data. While the economy continues to struggle, the stock market has posted significant gains. The latest news on deregulation and abandoning the Green crusade has added momentum to the DAX.

Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.