-- German equities fell Wednesday, as investors assessed the federal government's spring economic forecast alongside a flurry of corporate updates.
At closing, the blue-chip DAX index was down 0.31%.
Federal Minister for Economic Affairs and Energy Katherina Reiche said the government now expects Germany's gross domestic product growth at 0.5% in 2026, down from the prior forecast of 1%, as energy and raw material prices surge amid the US-Iran conflict. In 2027, real GDP growth is projected to slightly accelerate at 0.9%, against the previous estimate of 1.3%. Inflation for the two-year period is seen at 2.7% and 2.8%, respectively.
Speaking of the Middle East war, US President Donald Trump announced an indefinite ceasefire with Iran, the de-escalation remains tenuous, with the move viewed as a unilateral declaration without confirmation of compliance from Tehran or Tel Aviv. Trump also confirmed the US Navy would continue to block Iranian ports and coastlines.
"Three weeks ago, we saw a marked shift in the US-Iran War, from its 'kinetic' phase (bombing, etc.) to its 'economic' phase (mainly, the US's blockade of the Strait of Hormuz). This shift hasn't restored safe passage in the Strait yet, but traders are comforted, perhaps because the economic war attests to the US's strength (the navy's power to enforce a blockade and 'starve' Iran). The feeling is that this is a 'superior' strategy, which could lead to concessions from Iran earlier than otherwise," Macquarie said. "But controlling Hormuz also makes common cause with the US's recent attempts to control other critical 'straits', such as Gibraltar, Malacca, the Greenland-Iceland-UK Gap (GIUK), and Panama. If so, the US's long-term 'goal' may be to prevent China's hegemony by controlling all the physical nodes through which China's economy depends for its flows. Against that goal, having lower oil prices is of secondary importance to the US."
On the corporate side, German semiconductor company Infineon Technologies (IFX.F) surged to one of the top spots of the blue-chip DAX, rising 3.23%, benefiting from a sector-wide rally after Dutch computer chip maker ASM International and electrification and automation company ABB reported strong first-quarter figures amid the ongoing artificial intelligence investment boom.
Meanwhile, Deutsche Telekom (DTE.F) is weighing a potential merger with its US subsidiary, T-Mobile US, in a move to streamline the group's corporate and operational structure, according to a Bloomberg report. The deal would reportedly involve the creation of a new holding company designed to absorb the shares of both the German telecommunications company and its 53%-owned US unit. Deutsche Telekom was the worst performer, dropping 4.55%.