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Blue-chip DAX Index Up as German Business Climate Improves

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The blue-chip DAX index started the trading week in the green, closing 1.04% higher on Monday, on the back of improving German business sentiment and a pause in Middle East hostilities.

The ifo Institute's business climate indicator stood at 86.6 points in July, up from June's revised 85.7 points and the expected 86.1 points. The expectations indicator rose to 86.7 points from the revised 84.3 points, while the current conditions index ticked down to 86.5 points from 87 points.

"Normally, three consecutive increases in the Ifo index points would be a reason to party, celebrating increasing optimism in German businesses and higher hopes for an economic rebound in the second half of the year. However, in this highly volatile geopolitical environment, even leading indicators have become rather outdated," ING said. "Today's Ifo index reading probably reflects more the initial relief after the US-Iran Memorandum of Understanding than the recent surge in energy prices."

Speaking of the Middle East war, Washington paused its military campaign against Tehran over the weekend following 13 nights of US strikes. Tehran also halted its retaliatory attacks, but Reuters reported that Iranian officials reaffirmed the country's control over the Strait of Hormuz while emphasizing it had not asked the US to resume peace talks.

"The main market risk remains the energy and shipping front. Traffic through Hormuz remains severely disrupted, while the conflict has broadened into the Red Sea, where Iran-backed Houthi forces reportedly launched missile and drone attacks against Saudi energy infrastructure around Jizan and Yanbu over the weekend, prompting retaliatory Saudi strikes. This raises the prospect of simultaneous disruption to both Gulf and Red Sea export routes. So a welcome pause from the main actors but a fragile one, especially with side battles still ongoing," Deutsche Bank Research wrote.

On the economic data front, German import prices are expected on Wednesday, while Thursday releases include Germany's preliminary July inflation print as well as second-quarter gross domestic product figures for both Germany and the eurozone. Market watchers are also awaiting policy decisions from both the US Federal Reserve and the Bank of England this week.

In corporate news, Hochtief (HOT.F) lost 2.95% as the German infrastructure group raised its full-year 2026 operational net profit outlook to between 1.03 billion euros and 1.10 billion euros, up 30% to 40% on an annual basis and against its previous forecast range of 950 million euros to 1.03 billion euros. The guidance upgrade was supported by "very strong demand" for its North American-based construction services company, Turner, within the data center segment.

Meanwhile, Rheinmetall (RHM.F) secured an additional 60.5 million-euro order to supply heavy tractor units to the German Armed Forces. Under an expansion of a 2018 framework agreement, Rheinmetall MAN Military Vehicles will deliver 56 Elefant 2 transporters to the Bundeswehr in 2026 and 2027. The German arms manufacturer gained 1.25% at closing.

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