The DAX is outperforming European stocks today and has broken through the 200-DMA on the heels of its best month since September. Staying above the long-term trend line is key and support will come from economic growth, low rates and a weak euro. The trade spat is just noise at this point.
The German economy, while slowing, is still robust and some big DAX components such as Daimler and Volkswagen have reported solid 1Q results. The tide seems to be turning for EUR/USD and that will remove some pressure on earnings and just overall bolster sentiment. German stocks also have support from an ECB that is proceeding slowly from removing the stimulus punch bowl.
Steel and aluminum tariffs from the U.S. is a big wild card that may sour sentiment. But after being delayed another month, they may end up being more rhetoric than reality. The EU and businesses are right to warn of more market uncertainty. But investors can put that to one side and instead focus on still-strong underlying fundamentals helped by the soft euro.
Source: Bloomberg Pro Terminal
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