The DAX index is struggling as investors react to the ongoing energy crisis in Germany. The index is trading at €13,126, which is about 20% below the highest point this year, meaning it is now in a bear market. It is also hovering near its lowest level since March 9th.
Germany fires up coal plants
The DAX 40 index has been under pressure as investors continue worrying about the rising risks of a recession and corporate margins. Current conditions provide the perfect signs of a recession in Germany and other countries. For example, the unemployment rate in Germany has been in a strong downward trend.
At the same time, the country’s inflation has surged in the past few months. For example, data published last week revealed that inflation rose to 7.9% in May this year as the cost of doing business rose. Moreover, analysts believe this inflation will keep rising in the coming months.
Meanwhile, the European Central Bank (ECB) has now embraced a more hawkish tone and is expected to start hiking interest rates in its July meeting. The baseline is that the bank will deliver rates of 0.25%. As such, a combination of high rates and inflation and a low unemployment rate is perfect for a recession.