Berlin skyline

Germany’s DAX index took a dive on Tuesday after weak German Industrial Production data. Other European indices like FTSE 100, CAC 40 and Euro STOXX inched higher. European stocks edged higher boosted by large gains in sectors like real estate, utilities, and telecoms.

Germany’s Economic Concerns

According to the Federal Statistical Office, Germany recorded weak Industrial output data on in April 2021. Germany industrial output fell unexpectedly in April capping gains in the DAX index. Germany Industrial Production contracted by 1% MoM from the previous 2.2% missing the estimate forecast of 0.5%.

Shortages in semiconductors and other supply bottlenecks are hampering the recovery in Europe’s largest economy. Automakers fell by 0.8% after a six-day upsurge that took the DAX index close to its record high. Many companies had reduced or temporarily stopped production due to the Corona virus pandemic effects.

Production industry excluding energy and construction was down by 0.7% in April 2021. Production of consumer goods decreased by 3.3% as production of intermediate goods slightly fell. Capital goods production also took a nosedive in April 2021.

Energy production was up by 6.0% in April 2021 with the easing of the lockdown restrictions. Production in construction decreased by 4.3% in the same month.

The Germany ZEW Economic Sentiment declined in June signaling a bearish outlook for the EUR. It declined to 79.8 from the previous 84.4 missing its estimate forecast of 86.0.

The Germany ZEW Current Conditions contracted by 9.1% in June from the previous 40.1% surpassing its 27.8% estimate forecast. This has been termed as a strong recovery.

The DAX index will react to the US key inflation data to be released later this week. Investors are eagerly waiting for the release of the data to gauge the Fed’s monetary policy. With a surge in inflation, the Fed might taper their stimulus earlier than expected.

DAX Movers

MERCK, a science, and technology company was the best performer in the DAX index. The company rose by 2.61% after recording strong earnings. Other companies such as Delivery Hero SE, Vonovia SE, SAP, among others, were also among the top performers in the index.

Covestro, a leading polymer producing company, led the losses in the index. It declined by 1.72%. Heidelberg Cement, Volkswagen VZO and Daimler were also among the worst performers in the index.

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