Dax hits new record high as Democrats win US midterm majorities in Congress

Midterm result lifts German stocks

Democrats won majorities in both the House of Representatives and the Senate in the US midterm elections, a result that had been seen as the most likely scenario. Hopes for a less confrontational US foreign policy drove the Dax 2.22% higher to 26,437.67 points on 4 November, after it had already crossed the 26,000-point mark. Its intraday high of almost 26,542 points left it just 78 points short of its record. The Dow Jones Industrial also rose strongly in New York, closing 3% higher at 53,356 points according to tagesschau.de.

Jochen Stanzl of Consorsbank said the outcome helped markets in several ways.

“The result was settled quickly, it is clear-cut, Trump accepts it, and divided political power means less risk of political surprises.”

Joachim Schallmayer of Dekabank said the vote showed that Trump's policies cannot be enforced without limits, although he did not expect dramatic policy shifts and some sectors could face new conditions. Trump has so far indicated that he does not intend to contest the results, which markets received with relief.

Record territory on 5 November

A later report published on 5 November put the Dax at 26,644.33 points, above the August high of 26,628.74 points. In its pre-open estimate, IG Markets had put the index half a percent higher at 26,561 points and referred to a record of 26,619 points. Salah-Eddine Bouhmidi of IG said the index could test its all-time high within days if buyers held the breakout above 26,000 points, while adding that geopolitical uncertainty and the risk of sharp setbacks remained. Andreas Lipkow of CMC Markets said the new political balance could discipline US budget policy and ease worries about public debt and long-term bond yields, and that the chances of a year-end rally had clearly risen.

Oil and gas prices fall

Brent crude traded above 115 dollars a barrel until the end of October, then fell about 20% at its peak during the week of 2 November. Handelsblatt put the January contract near 95 dollars on the morning of 5 November. European gas on the TTF contract topped 100 euros per megawatt-hour the week before, the first time since Russia's full-scale invasion of Ukraine in 2022, and was quoted at 85 euros for December delivery on 5 November. Iran's foreign ministry said Washington had been offered the reopening of the Strait of Hormuz within two days if it accepted Tehran's conditions, and mediators have intensified their talks.

Sector winners and losers

Heidelberg Materials led the Dax with a 9.6% gain on 4 November after lifting third-quarter sales and operating profit and confirming its targets. Continental rose 5.2% after raising its full-year operating profit target following an unexpectedly high quarterly profit. BMW gained 5.5% despite cutting its forecast again, a step Citi welcomed as a move to speed up restructuring. Deutsche Bank rose 6.9%, Scout24 6.7% and Commerzbank 4.9%. AI-linked shares were avoided, with Infineon down 4.1%, Aixtron down 6.3% and Siemens Energy down about 8%, as investors feared a Democratic-controlled Congress could slow the expansion of AI infrastructure.

Heidelberg Materials9.6%

Deutsche Bank6.9%

Scout246.7%

BMW5.5%

Continental5.2%

Commerzbank4.9%

Infineon-4.1%

Aixtron-6.3%

Heidelberg Materials

9.6 %

Deutsche Bank

6.9 %

Scout24

6.7 %

BMW

5.5 %

Continental

5.2 %

Commerzbank

4.9 %

Infineon

-4.1 %

Aixtron

-6.3 %

Data from the article text

Rheinmetall and a weak German economy

Rheinmetall shares fell almost 17% on 5 November, placing the defence group last in the Dax, after it cut its forecast again on the evening of 4 November. Deutsche Telekom, DHL Group, Siemens Healthineers, Commerzbank and Hochtief also report quarterly results. The rally contrasts with bad news from German industry, where companies are cutting thousands of jobs as trade conflicts and stronger competitors erode their markets. Investors are focusing on the future profits of the 40 Dax companies rather than current conditions.