German shares surged to a record high but reversed sharply on Wednesday.
GER 30 – Daily Chart
The price of the GER 30 index surged to an all-time high above 22,800 on Wednesday but has since slumped to 22,444. Larger support could be as low as 21,200.
European shares jumped to a record high this week as defense stocks were boosted by the potential for increased spending by Euro governments on military budgets.
With global relationships shifting a reduced US involvement in European defense, European leaders have called for increased defense spending, potentially increasing government borrowing. Eurozone bond yields were pushed higher, benefiting bank stocks with a 1.9% uptick, while utilities declined. Defense stocks rose, led by Leonardo, Sweden’s Saab, and French company Thales.
US Defense Secretary Pete Hegseth also confirmed the Trump administration’s decision not to send American troops into Ukraine. The statement came after a visit to Germany and he highlighted the importance of European nations stepping up their defense investments.
“The European continent deserves to be free from any aggression, but it ought to be those in the neighborhood investing the most in that individual and collective defense”.
Goldman Sachs added that European valuations are being boosted as investors are actively looking at different types of shares, citing European banks as a driver of returns. “This is a mix of value and growth that we have not seen for many years,” Goldman’s analysts said.
Germany’s high-stakes election is scheduled for Sunday and markets have been pricing in a near-perfect result. However, there is a risk of gains for the AfD party and even a win for the market-friendly front-runner could lead to extended coalition talks.
Traders may now be taking profits ahead of the weekend to digest the election results on Monday.
