DAX tanks amid global economic fears

Germany’s DAX stock index on Monday dropped to its lowest level in nearly a year on investors' fears about the downgrading of the US credit rating and the eurozone debt crisis.

DAX tanks amid global economic fears
Photo: DPA

The index of Germany’s 30 leading blue-chip companies closed at 5,923.27 points, down more than 5 percent. The last time the DAX was that low was September 2010.

Monday’s heavy losses at the Frankfurt Stock Exchange and other important European bourses came after US markets weakened in early trade. The broad sell-off started last week amid worries the world’s leading industrial nations could be heading into another period of sustained economic crisis.

Across the Atlantic, financial market observers were closely watching Wall Street after rating agency Standard & Poor’s cut the United States’ credit rating from the top-notch AAA credit rating to AA+. The Dow Jones Industrials index was down 3 percent in morning trade.

Earlier on Monday, the markets seemed to be somewhat calmed, at least temporarily, by statements from the G-7 and G-20 groups of countries, which said they were prepared to ensure stability of the global financial system. They added that European countries were putting austerity measures in place in order to ensure sustainable budgets.

German Chancellor Angela Merkel and French President Nicholas Sarkozy also said on Sunday that they would do everything possible in order to ensure equilibrium and stability in Europe.

But that has not removed deep worry among investors that some European Union countries, such as Spain, Italy and Greece, continue to suffer dangerously high debt loads that drag down the entire eurozone.

The Local/DAPD/DPA/mdm

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German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.