A rebound in German industrial output and manufacturing confidence has sparked a broad-based rally across European markets, with the DAX rising 2.4% and the XETR index gaining 1.8%. The rally extends to financials and industrial sectors, lifting EWG and IBB ETFs.
- DAX rose 2.4% to 17,892 on improved industrial sentiment
- ZEW Economic Sentiment Index for Germany reached 38.7 in January
- German manufacturing PMI rebounded to 51.2, signaling expansion
- EWG and IBB ETFs gained 2.1% and 2.5% respectively
- EURUSD climbed to 1.0890, reflecting stronger Eurozone outlook
- Revised Q1 2026 Eurozone GDP forecasts upgraded by 0.3 percentage points
A resurgence in Germany’s industrial sector has ignited a wave of investor optimism, fueling a significant rally across European equities. The DAX climbed 2.4% to close at 17,892, marking its strongest single-day gain since November 2024. This momentum was driven by a 15-point jump in the ZEW Economic Sentiment Index for Germany, which rose to 38.7 in January, signaling improved expectations for the business cycle. The manufacturing Purchasing Managers' Index (PMI) also rebounded to 51.2, above the 50 threshold indicating expansion, reflecting stronger export orders and domestic demand. The broader market response was immediate. The XETR index, a key benchmark for German equities, advanced 1.8%, while the iShares MSCI Germany ETF (EWG) rose 2.1%. Industrial-focused ETFs, including the iShares Global Industrials ETF (IBB), climbed 2.5%, reflecting strong sector-specific demand. The EURUSD pair strengthened to 1.0890, up 0.6% on the day, as investors reassessed the Eurozone’s growth trajectory amid improved German fundamentals. Market participants are now reassessing growth forecasts for the Eurozone, with the German recovery seen as a potential catalyst for broader economic stabilization. The turnaround in industrial activity—marked by rising capital expenditures and increased production capacity utilization—has prompted analysts to revise Q1 2026 GDP expectations upward by 0.3 percentage points for the region. This shift is particularly notable given the persistent contraction in manufacturing activity throughout 2023 and early 2024. The rally has implications beyond Europe, influencing global risk appetite. Equity markets in the U.S. and Asia showed positive spillover, with U.S. futures indicating a higher open. Investors are now closely monitoring upcoming German inflation and employment data for further confirmation of sustainable recovery momentum.