The Dax, which tracks the performance of Germany’s 30 largest companies, keeps hitting all-time highs. Analysts are calling this a turning point after six weak years, say Susanne Schier and Anke Rezmer in Handelsblatt, as stronger growth in the eurozone – and less political uncertainty – finally becomes apparent. Yet “not all is as rosy as it seems in Europe”.
One key headwind is the possibility the European Central Bank will start to reverse its ultra-loose monetary policies. What’s more, a survey of German executives suggests that, for the first time in two years, they are no longer buying German stocks. Other surveys of individual investors and private-equity investors are also turning less bullish.
On a forecast price-to-earnings ratio of under 14, the Dax doesn’t look pricey. But note that the index is highly cyclical, and four economically sensitive stocks – Bayer, BASF, Daimler and Siemens – account for more than a third of the gains since December, says Jonathan Eley in the Financial Times. The rally looks vulnerable to changes in sentiment. “Investors would do well to exercise caution.”