DAX Falters as Rheinmetall Rout Offsets Brighter Business Mood, Tech Jitters Linger

DAX fell 0.62% as Rheinmetall crashed 18.65% on frigate cancellation, overshadowing Ifo rise. Markets await Micron results for AI direction.

Frankfurt’s blue-chip index ended a choppy session in the red on Wednesday, unable to shake off a devastating blow to its defence sector even as improving domestic sentiment offered a brief lift. The DAX closed 0.62% lower at 24,740 points, caught between two opposing forces: a surprise spike in business confidence from the Ifo Institute and the steepest single-day drop in Rheinmetall’s history.

The trigger for the defence rout came from Berlin. Germany’s defence ministry pulled the plug on the F126 frigate programme, citing persistent delays and ballooning costs. Rheinmetall had been vying to take over the project, which carried a potential price tag of around €12 billion. The stock cratered 18.65% to €949, leaving it roughly 50% below its all-time high from October last year. The loser’s gain turned out to be Thyssenkrupp Marine Systems, which is now set to supply eight MEKO A-200 DEU frigates instead — four initially at €6.3 billion, with an option for four more worth about €5.3 billion. Shares in TKMS surged 10.3% in the MDAX to €80.30.

The sell-off in defence overshadowed what was otherwise a positive surprise from the Ifo Institute. Its business climate index edged up to 85.6 in June from 85.0 in May, beating market expectations. Ifo president Clemens Fuest noted that companies were perceiving a less uncertain environment. The data provided a temporary tailwind for the DAX in late morning trade but was no match for the Rheinmetall shock. Among single stocks, MTU Aero Engines stood out with a 5.95% gain, boosted by a favourable analyst call on demand and margin trends. Puma added 2.0%, while Daimler Truck and Siemens Healthineers both slipped less than 1%.

While the session was dominated by corporate-specific news, traders were already looking ahead to after-hours results from Micron Technology. The US chipmaker’s quarterly report, released after Wall Street closed, has become a litmus test for the artificial intelligence trade. The consensus for its fiscal third quarter stood at roughly $34.66 billion in revenue and earnings per share of about $19.95 — sky-high expectations that have kept the entire semiconductor complex on edge. Earlier in the week, investor Dan Niles publicly trimmed his chip holdings, warning of a near-term correction in AI stocks, while analysts like Andreas Lipkow of CMC Markets compared the sector to a classic hog cycle with abrupt reversals. South Korea offered a preview of the tension: Samsung Electronics and SK Hynix tumbled more than 12% each after regulators warned against leveraged chip ETFs. Infineon on Xetra closed at €81.56, steady but under watch.

On the macro front, a sharp drop in oil prices provided a silver lining. Brent crude fell 4.21% to $73.63 a barrel on hopes of a de-escalation in the Iran situation. Cheaper energy could ease cost pressures for energy-intensive DAX constituents in the weeks ahead.

Technically, the DAX continues to hover just above its 50-day moving average of 24,575 and the 200-day line at 24,266, both still offering support. Resistance sits at 25,181, with the January all-time high of 25,510 in sight. The index remains barely positive for the year, up 0.82%. But the tone for Thursday will likely be set by Micron: a beat could restore confidence in the AI infrastructure narrative, while a miss risks triggering another wave of selling across the technology sector — with direct consequences for Frankfurt’s opening bell.