DAX Stages Recovery as Tech Rally and VW’s €7.4B Deal Offset Rheinmetall Fallout

Germany's DAX climbs above 25,000 on tech rally and VW's €7.4B unit sale, but thin trading and defense sector pain temper gains.

Germany’s blue-chip index clawed its way back above the 25,000-point psychological barrier on Thursday, drawing strength from a tech-driven surge on Wall Street and a major corporate disposal by Volkswagen. After the previous session’s defence-sector rout, the DAX last traded at 25,078, a gain of 1.37 percent, though the thin trading volume told a more cautious story.

Just 18 million shares changed hands over the course of the day—a drop of nearly 80 percent from the weekly average. That lack of conviction left the index closing at 24,935.38 points, still within striking distance of its all-time high but far from a decisive breakout.

Defence pain lingers as VW’s Bain deal shifts focus

The initial catalyst for this week’s turbulence remains firmly in place: Rheinmetall’s near-19 percent plunge earlier in the week after Berlin cancelled the €15 billion frigate project—the largest procurement programme in the history of the German Navy. The government instead opted to order eight ships from rival TKMS, whose shares surged before profit-taking set in on Thursday. Other defence names such as Renk and Hensoldt also felt the pressure.

But a separate corporate development helped redirect investor attention. Volkswagen struck a deal to sell 51 percent of its heavy-engine unit Everllence to Bain Capital, pocketing €7.4 billion and providing a bright spot for an auto sector that has been grappling with demand uncertainty. The transaction injected fresh cash into the carmaker’s coffers and lifted overall sentiment.

Tech tailwind drives Infineon and lifts the broader market

The strongest impetus came from the technology sector. After the US close, Micron Technology delivered blowout quarterly results, reigniting appetite for semiconductor stocks and AI-related names. In Frankfurt, Infineon surged nearly five percent to lead the DAX gainers, while the positive mood spilled into other growth-sensitive shares.

The macro backdrop also turned more supportive. Brent crude slipped to around $73 a barrel, its lowest since February, easing inflation concerns. That in turn pushed the yield on ten-year US Treasuries below 4.5 percent and later to 4.37 percent, taking the sting out of worries about tighter financial conditions.

Consumer mood brightens, but hawkish rhetoric lingers

Domestically, the GfK consumer climate indicator edged higher for July, reflecting improved income expectations and relief from stable energy prices. German households appear to be banking on further fiscal relief, providing a modest underpinning for the recovery.

Yet the picture on monetary policy remains less forgiving. Kevin Warsh, the newly installed head of the US Federal Reserve, signalled a hawkish tilt, pushing back against any near-term rate cuts. Rising inflation forecasts in the US are keeping cheap liquidity off the table for now, a headwind that will cap any runaway rally.

Chart picture clears, but resistance holds firm

Technically, the DAX has stabilised with some conviction. The index successfully defended its 50-day moving average near 24,595 points, and the relative strength index now sits at a neutral 54, indicating room for further upside without overheating.

The next major barrier is the all-time high of 25,507 points. With the close just below 25,000, the immediate resistance zone remains the stiffest short-term hurdle. A clean break above it would open the path to fresh records, but the day’s anaemic volume suggests that the market may need a stronger catalyst—or a quieter defence sector—before making that leap.