Germany’s Dax index surged to a record high on Friday, buoyed by renewed optimism over global trade and confidence in Berlin’s new leadership.
The benchmark became the first major European index to fully recover from the turmoil sparked by Donald Trump’s recent tariff threats.
US and Germany: good vibes
The Dax rose 0.6% in early trading, driven by positive momentum following a US-UK trade agreement and a promising call between President Trump and newly elected German Chancellor Friedrich Merz.
Both leaders agreed on the need to resolve trade tensions, ahead of a critical US-China meeting set for the weekend.
Markets were further lifted by Merz’s conciliatory approach. While advocating for European independence from the US during his campaign, he struck a pragmatic tone with Washington, calling America an “indispensable friend and partner”.
Defence spend soaring
Germany’s stock resurgence is also rooted in Merz’s fiscal plans. His commitment to raise borrowing for defence and infrastructure investments has sparked investor enthusiasm, particularly in defence and banking stocks. Defence contractor Rheinmetall has skyrocketed over 170% this year, while Deutsche Bank is up 43%.
Emmanuel Cau, head of European equity strategy at Barclays, noted the extra energy in Germany’s markets: “There’s more and more interest in Germany as part of this revival narrative and the arrival of the new government.”
Dax 18% up
The L-DAX Index, aka the Dax, at the Frankfurt stock exchange, has gained nearly 18% in 2025, outperforming Wall Street. The S&P 500, while rebounding from early April losses, remains down 4% this year and below its February peak.
Still, with confidence rebuilding and geopolitical risks easing, Germany is fast becoming the standout story in European equities this year.
