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Germany’s Dax index climbed to a record high on Friday as investor optimism over US trade deals boosted global markets, becoming the first major European benchmark to recoup the losses sparked by Donald Trump’s tariff threats.
The index was 0.7 per cent higher in morning trading, after Thursday’s announcement of a US-UK trade deal on Thursday was followed by a call between Trump and Germany’s new chancellor, Friedrich Merz, in which they agreed on the need to quickly resolve trade disputes.
The Dax’s return to all-time highs also reflects the wave of enthusiasm for German stocks sparked earlier in the year by Merz’s plans to increase borrowing and inject hundreds of billions into the country’s military and infrastructure.
Emmanuel Cau, head of European equity strategy at Barclays, said the trade news had given a broad boost to stock markets. However, he added that “there is an extra degree of excitement in Germany as part of this revival narrative and the arrival of the new government”, he said. “There’s more and more interest in Germany.”
European stocks have outshone their Wall Street peers this year due to optimism over defence spending combined with growing fears over the impact on the US economy from Trump’s trade war.
The Dax is up nearly 18 per cent year to date. Although US stocks have also recovered their losses since Trump’s “liberation day” tariff announcements in early April, the S&P 500 benchmark remains well below its February all-time high and is down nearly 4 per cent so far in 2025.
This has partially narrowed a gaping valuation gap between US and European equities that has widened in recent years due to a relentless rally in US tech stocks.
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