GER 30 – Daily Chart
The GER 30 index rallied to the March highs at 23,493, and the price has now slipped to the 22,957 level. There is a chance of a correction in the short term, with support starting at 22,400.
Germany’s historic shift in lifting its debt brake is expected to reshape Europe’s economy with a wave of public spending that could boost growth across the eurozone.
Goldman Sachs analysts have singled out 12 buy-rated European companies with the defence sector that could benefit from the spending boom in industries such as airport operations and renewable energy.
The German coalition set out a €500 billion infrastructure fund, equivalent to 11.6% of GDP in 2024, to be released over the next ten years. This fund aims to revamp the country’s infrastructure, boost the energy transition and add investment to housing and transport.
The new German leader has broken from the country’s strict rules on spending to exempt military spending from the constitutional debt rules. That can add up to €11 billion per year in additional military upgrades.
“There has been a material repricing of reflation risk in Europe versus the U.S. across assets,” said Christian Mueller-Glissmann, CFA, at Goldman Sachs.
Goldman said that the chemical firm BASF could see cash flow improve as it brought a €10 billion investment in China online. E.ON can benefit from spending on electrical grids and Siemens Energy can be boosted from a move to gas power plants, which make up 31% of the group’s revenue.
Wind turbine manufacturers and logistics companies could also benefit from the fiscal shift. Germany’s stock market has been surging despite the struggling economy, and government spending will be watched closely.
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