German Economy in Crisis as Stock Markets Tumble on AI Fears
The German economy is grappling with a crisis, according to Ifo President Clemens Fuest. Meanwhile, stock markets across Europe are in a state of worry, with the Euro Stoxx 50 and DAX both experiencing significant drops.
Market sentiment has been dampened by concerns that stock prices have risen too swiftly and reached unsustainable heights, particularly in the AI sector. This worry has been exacerbated by some disappointing quarterly reports. The DAX has seen Infineon and Rheinmetall as its biggest losers, both down over 4 percent. The Euro Stoxx 50 has also taken a hit, dropping over 1.3 percent to 4,797 points.
The tech-heavy US Nasdaq experienced a sharp drop of nearly four percent on Wednesday, its worst performance since October 2022. This downward trend is expected to continue today, potentially impacting the German stock market. The DAX is currently down 0.8 percent, hovering around 18,244 points.
Economic forecasts are expected to be revised downwards, according to Thomas Gitzel, Chief Economist of VP Bank. The Ifo business climate data for July reflects this pessimism, indicating a further deterioration in the mood of the German economy.
Next week's earnings reports from tech giants Microsoft, Meta, Apple, and Amazon could provide some clarity and potentially influence market recovery. However, with the German economy in crisis and stock markets struggling, investors are bracing for a challenging period ahead.
