MW German stocks are quietly rallying. An election's coming up.

By Steve Goldstein

German stocks have been the stars of the young new year, ripping higher on Friday to a fresh record high.

The gains come amid a weak backdrop for the country - cheap Russian gas that fueled its industrial base has been cut off, the key export market of China is stagnating and domestic demand has been faltering.

Last month, the Ifo business climate index, a closely watched economic gauge, fell to the lowest level since May 2020.

But the German DAX DX:DAX jumped 1% on Friday, extending a strong run since the beginning of the year. It's up 5% vs. the 1% advance of the S&P 500 SPX advance in 2025.

"Despite highly volatile interest rate expectations, the DAX continues to take in the mountain air and investors are visibly comfortable at the new level of 20,700 points," said Jochen Stanzl, chief market analyst at CMC Markets.

The gains come ahead of federal elections on Feb. 23. Those elections could see the center-right CDU/CSU alliance led by Friedrich Merz take power from the Social Democrats led by German Chancellor Olaf Scholz.

The latest YouGov poll shows the CDU/CSU alliance at 30%, the far-right AfD party backed by Elon Musk at 21%, and the SPD at 18%.

Strategists at Citi say a new government could lead to deregulation, more flexible labor markets and corporate tax cuts.

Commerzbank (XE:CBK) and Deutsche Bank (XE:DBK) shares have each rallied 11%, but the gains are broad based. Bayer (XE:BAYN), still reeling from one of the worst-ever M&A transactions when it bought Monsanto, has gained 9% this year.

Microchip maker Infineon Technologies (XE:IFX), software giant SAP (XE:SAP) and Heidelberg Materials (XE:HEI) all have registered strong advances.

-Steve Goldstein

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January 17, 2025 07:09 ET (12:09 GMT)

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