The DAX sees a continuing climb after a noteworthy week
The DAX continues its ascent, adding 0.32% in early Friday trading to reach 15,836.65 points, capping off a strong week.
Overall, the index shows a weekly gain of almost 4%. Recent news of weaker inflation levels in the U.S. provided a welcomed boost to the DAX's growth.
The MDax, an index of medium-sized companies, also enjoyed a 0.78% increase on Friday, hitting 26,170.18 points. The EuroStoxx 50 eurozone index saw a 0.31% rise as well.
The positive trend of the DAX is likely catching the attention of stock exchanges worldwide, with the index continuing its 0.32% gain on Friday. Factors such as enhanced international revenue exposure, an attractive valuation gap, and robust market depth are contributing to the DAX's ongoing success.
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The DAX's international revenue diversification is one of its key strengths, with major constituents generating only about 20% of their revenue within Germany's borders. This broad exposure has proven beneficial during periods of market volatility, making the index a more accurate reflection of global economic conditions.
The index's current valuation stands at around 18 times earnings, providing potential opportunities for investors seeking exposure to global growth without breaking the bank. This valuation gap sets the DAX apart from the S&P 500, which carries an eye-popping multiple of 28.
Strong technical analysis, enhanced market breadth, and a bullish trend in the Hang Seng Index also contribute to the DAX's positive momentum. Investors remain optimistic about further interest rate cuts by the European Central Bank, which would ease financial conditions and boost equities even further.
Corporate earnings from firms such as SAP, Vonovia, and Siemens Energy have played a role in the index's gains this week, as have the performances of sectors like consumer cyclicals, technology, and financials.
Enrichment Data
- Global Revenue Exposure:
- The DAX index has an advantageous international revenue exposure, with major companies generating only about 20% of their revenue domestically.
- Valuation Advantage:
- The DAX benefits from a more favorable valuation compared to the S&P 500, allowing investors to gain exposure to global growth at lower prices.
- Technical Analysis and Market Breadth:
- The DAX has demonstrated strong momentum, with a high percentage of constituent stocks trading above their respective 200-day moving averages, signaling an improving market breadth.
- Positive Momentum and Correlation with Other Indices:
- The DAX's positive correlation with the Hang Seng Index may continue to drive the DAX higher as the Hang Seng Index extends its bullish trend.
- Economic Indicators and ECB Rate Cuts:
- Despite challenges in the German and Eurozone economies, investors remain optimistic about further ECB rate cuts, which would help boost equities.
- Corporate Earnings and Sector Performance:
- Robust corporate earnings and sector performances have contributed to the DAX's gains, with companies like SAP and Siemens Energy leading the charge.
References
: "DAX Revenue Structure by Countries." Statista. Statista, 2022. Web. 28 Jan. 2023.
: "DAX Sector Performance and Hang Seng Correlation." Trading212 Research. Trading 212, 2022. Web. 28 Jan. 2023.
: "Why the DAX Is Still on Track for Further Gains." Bloomberg. Bloomberg, 20 Jan. 2023. Web. 28 Jan. 2023.
: "Economic Indicators for Germany." TradingCentral. TradingCentral, 2023. Web. 28 Jan. 2023.
