Stock market's stalwart, the Dax, experiences further decline as panicked investors flock to secure investment options
In a notable shift observed at the start of trading on Friday, stocks of Daimler Truck, Sartorius, and Siemens Energy came under pressure, mirroring a broader trend affecting cyclical sector stocks across Europe. However, one company stood out from the crowd – Bayer.
Amidst the market weakness, Bayer bucked the trend and led the gains, outperforming the DAX index. This resilience can be attributed to stronger-than-expected second-quarter earnings, particularly in its Crop Science division which posted a 55% EBITDA increase above estimates. The pharmaceuticals division also showed positive development, reinforcing confidence in Bayer's outlook for 2025.
Despite setting aside more funds for costly US lawsuits, the preference for Bayer's stability over cyclical, riskier sectors under pressure is evident. Defensive stocks like Bayer, which provide essential healthcare and agricultural products, are less sensitive to economic cycles and external shocks.
Market analyst Andreas Lipkow noted that investors are taking partial profits ahead of the weekend due to the announcement of further tariffs, for example, against Switzerland. He also mentioned that there are too many geopolitical hotspots burning, making the impact of a potential wildfire on the global economy hardly predictable. The current truce between the EU and the US in the trade dispute can quickly be broken, according to Lipkow.
Investors are primarily selling cyclical sectors and focusing on defensive stocks like Bayer, Eon, and bank stocks due to geopolitical uncertainties and potential tariff announcements. This rotation from riskier, economically sensitive sectors towards defensive sectors is a common response amid heightened external risks like international trade tensions and geopolitical instability.
The European common currency showed a slight depreciation, with one euro being worth 1.1408 US dollars and one dollar equivalent to 0.8766 euros. The Dax, however, did not experience significant changes, remaining at around 23,685 points at midday on Friday, down 1.6 percent from the previous day's close.
Bayer's resilience and raised sales and earnings outlook for the full year further underscore the company's ability to navigate challenging market conditions and its position as a safe haven for investors in times of market volatility and geopolitical tension.
Investors are rotating their portfolios towards defensive stocks like Bayer, Eon, and bank stocks due to geopolitical uncertainties and potential tariff announcements, as these stocks offer stability and are less sensitive to economic cycles and external shocks in the stock-market. In fact, despite setting aside more funds for costly US lawsuits, Bayer's resilience and raised sales and earnings outlook for the full year further highlight its ability to navigate challenging market conditions, making it an appealing investment option in the finance sector.
