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DAX Index Down; German Industrial Output Drops

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The blue-chip DAX index closed Monday trading 0.25% lower, as the market weighed Germany's latest industrial production figures, domestic political shifts and escalating weekend US-Iran strikes.

According to Destatis, industrial output in July was down 1.1% month over month, against a revised zero growth and an expected 0.1% gain. The downturn was mainly attributed to a 9.2% month-over-month drop in automotive production, likely due to a multi-week factory shutdown.

Zooming out, Eurostat's third estimate showed the eurozone's gross domestic product edging up 0.6% in the second quarter, revised upward from the second estimate's 0.4% uptick and following the prior three-month period's zero growth. Household consumption contributed 0.2 percentage points to quarter-on-quarter GDP growth in the euro area.

On the political front, investors digested the AfD's victory in Saxony-Anhalt, where the right-wing party won 43.8% of the vote, falling short of an outright majority, while Chancellor Friedrich Merz's CDU party's vote share was nearly cut in half to 17.2%, Reuters reported. "The result confirms AfD's momentum, though mainstream parties rule out a coalition and the direct federal impact is limited," Danske Bank wrote.

For the week ahead, the market is expected to focus on the European Central Bank's policy decision on Thursday, the same day as the release of Germany's final August inflation print. Market watchers are also awaiting the August producer price and inflation reports for the US due on Thursday and Friday, respectively.

In corporate news, Volkswagen (VOW.F, VOW3.F) signed an agreement to potentially sell its Osnabrück, Germany, facility to Israel's Aurelius Capital and the German state of Lower Saxony, aiming to preserve jobs by transforming the site into a defense and security competence center. The carmaker was down 0.73% at closing.

Meanwhile, BofA Global Research upgraded Nordex's (NDX1.F) rating and raised its price objective to 54 euros from 50 euros, saying improving fundamentals for the wind turbine manufacturer support additional estimate upgrades.

"We upgrade Nordex to Buy from Neutral after large recent underperformance (stock down 26% since 5 May high vs SXNP +4%) as we now see significant further earnings upgrades ahead. In particular, we see further German vol growth, recent US orders and a stable supply chain underpinning 3/21% upside to 2026/27 adj EBITDA consensus (we raise estimates 0/8%). Mgmt could also list their mid-term margin guide to 11-13% (from 10-12%, 2028 cons 11.3%) next Feb, in our view," the research firm wrote. Nordex surged 10.50% on Xetra.

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