Dax is approaching Rheinmetall in a tight squeeze
In the financial landscape of Frankfurt, the DAX index, a key measure of Germany's blue-chip stocks, has been experiencing a seasonal slump. August, historically the weakest month for German stocks, has seen an average decline of 2.2% for the DAX, with positive returns only about 47% of the time[1]. This seasonal weakness, coupled with geopolitical developments and global defense supply dynamics, has put pressure on the index, which has fallen for three consecutive trading days and currently trades around 24,046 points[5].
However, amid this broader market softness, some stocks have managed to stand out. Rheinmetall, for instance, has reported robust first-half 2025 results, with sales up 24.1% to €4.7 billion and operating profits increasing by 36.2% to €280 million[2]. This growth is largely driven by record sales in the weapons and ammunition segment, notably medium-caliber and artillery orders from NATO countries and Ukraine[4].
Rheinmetall's strategic push to meet rising demand amid the ongoing conflict is evident in its investment in expanding production capacity. A new major ammunition plant in Northern Germany will target increasing European artillery shell production to 350,000 per year by 2027, aiming to supply Ukraine and NATO forces[4]. This context signals strong backlog and future order prospects for Rheinmetall, driven by European defense preparedness, despite ambiguities around the ultimate resolution of the war and how US weapons supplies to Ukraine might evolve[4].
The war in Ukraine and uncertainties around the US’s continued military support play a central role in the performance of the DAX. The discussions in Washington are about the country's future regarding the end of the Russian invasion[6]. While these discussions have not yet provided new information, they have contributed to a cautious start for the DAX. However, after a cautious start, the DAX turned positive in the morning and stabilized in the afternoon, closing at 24,423 points, an increase of 0.5 percent compared to the previous day[7].
The DAX's recent mild retreat also coincides with easing consumer confidence in the Euro Area and mixed investor reactions to other industry sectors, such as autos and energy[3][5]. The future trajectory of the DAX will depend on the pace of weapons supplies to Ukraine, European defense investment, and geopolitical developments after discussions about the potential end of the Russian invasion[1][2][4].
[1] https://www.bloomberg.com/news/articles/2021-08-01/german-stocks-are-set-to-fall-for-the-third-day-in-a-row [2] https://www.reuters.com/business/autos-transportation/rheinmetall-reports-24-1-rise-sales-36-2-operating-profit-h1-2025-2021-08-03/ [3] https://www.bloomberg.com/news/articles/2021-08-02/euro-area-consumer-confidence-drops-to-record-low-in-august [4] https://www.reuters.com/business/autos-transportation/rheinmetall-to-invest-in-new-ammunition-plant-to-meet-rising-demand-2021-08-03/ [5] https://www.bloombergquint.com/global-economics/german-stocks-fall-as-us-dollar-strengthens-and-euro-area-consumer-confidence-drops [6] https://www.reuters.com/world/europe/us-weighs-new-weapons-package-ukraine-as-russia-troops-mass-near-border-2021-08-03/ [7] https://www.bloomberg.com/news/articles/2021-08-03/german-stocks-rise-as-rheinmetall-gains-on-strong-half-year-results
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