DAX Trigger Is All Euro As Investors Look Past Economy, Greece
By Roxana Zega
(Bloomberg) — More and more, it?s the euro calling the
tune for German stocks, not economic prospects or the state of
talks with Greece.
A weakening in the currency against the dollar helped send
the DAX Index up 2.8 percent this month, beating the Euro Stoxx
50 Index. The German gauge and the euro are moving in opposite
directions by the most since 2013.
Swings in the shared currency are affecting German equities
more than others in the region because the country is the
biggest European trade partner with the U.S. For investors,
that?s a key motivation to buy German stocks, outweighing
forecasts for the biggest economic growth since 2011 or a
potential resolution of the Greek bailout negotiations.
?German companies have good products, but there is some
extra level of operational leverage when the euro is very
weak,? said Pierre Mouton, who helps oversee $8.3 billion as a
money manager at Notz, Stucki & Cie. in Geneva. ?A weak euro
helps them be competitive.?
The DAX is recovering in May after its worst slump in nine
months, caused by a strengthening of the euro. The 30-day
correlation between the stocks gauge and the currency reached
minus 0.63 last week. A reading of minus 1 indicates they move
in inverse directions. The index fell 0.3 percent at 10:14 a.m.
in Frankfurt.
The prospects for German stocks look good for the rest of
the year, with analysts estimating the euro will fall more than
4 percent by December.
?There?s definitely a globalization trend, which is more
pronounced for the DAX members because they are very active
outside Europe,? said Olgerd Eichler, a fund manager at
Mainfirst Bank AG in Frankfurt. ?Unless you have a major
rebound in the euro, I wouldn?t be particularly concerned about
German companies.?