German politics is overshadowed by uncertainty, corporate scandals have rocked the business world and once-mighty Deutsche Bank is slashing thousands of jobs and abandoning ambitions to become a Wall Street-type big global player.
In these circumstances, you may have expected the country’s flagship DAX 30 index to be heading south.
In fact, the benchmark has remained remarkably steady during the past year. This could be a tribute to the essential stolidity of German commerce, or it could be, as President Donald Trump has alleged, the result of unfair manipulation of the single currency to benefit German exporters.
Police raided Deutsche Bank
This morning, the DAX traded at 12,388.70, higher than a month ago when, on 24 June, it stood at 12,274.57. Six months back, on 23 January, the DAX stood at 11,071.54, although 12 months ago the index was higher than today, trading at 12,548.57 on 23 July 2018.
Looking through the constituent companies of DAX is like reading a who’s-who of German business and industry, with great names that have become synonymous with the country’s post-war economic miracle. In financial services, Allianz and Deutsche Bank fly the flag, while Germany’s peerless engineering industry is represented by BMW, Daimler, Volkswagen and Siemens.
Meanwhile, Deutsche Bank’s Frankfurt headquarters was raided by police last autumn looking for evidence of money laundering. More recently, Deutsche – having lost huge amounts of money through investment-banking activities – has admitted defeat in its 20-year attempt to become a global giant, and 18,000 jobs are to go.
Strains with Russia and Turkey
Last month, President Trump accused the European central bank of manipulating the value of the euro, making it cheaper in order to help euro-zone exporters, of which Germany is the biggest.
Washington has put Germany and Italy, also a major exporter, on a “currency manipulation watch list”, along with, bizarrely, Ireland, which has nothing like the influence of Germany in terms of managing the single currency.
The changing of the political guard in Berlin is a cause of uncertainty for financial markets. Long-serving Chancellor Angela Merkel is on her way out but it is unclear who will replace her.
Her Christian Democratic Union party has elected defence minister Annegret Kramp-Karrenbauer as its leader but it is far from certain that she will succeed to the chancellorship.
Meanwhile, the CDU’s coalition partner, the Social Democrats, is in steep decline in terms of public support, while the Greens and the right-wing Alternative for Germany party are picking up support.
Tensions between the west and both Russia and Turkey make for an added source of uncertainty for the German economic and political scene, given the proximity of the two countries to Germany.