This month, the specialty chemicals group Lanxess will be relegated from the premier league of German companies, the DAX index of 30 leading shares, and replaced by property company Deutsche Annington.
This is a trend being seen around the world. Central banks pour more and more cheap money into “concrete gold”, as real estate has been dubbed. Nowhere are prices rising faster than in the property sector. Anyone, like the central bankers, who complain about a lack of inflation, should just buy a house – the problem will be solved.
The glut of money that once again boosted stock markets following the European Central Bank’s meeting on Thursday, together with the explosion in property prices, is benefiting real estate companies, and thus their share prices. They are becoming more valuable and as a result are being promoted to the top segment of the stock exchange.
But Annington’s rise stands for more than that. The latest rotation in Germany’s stock market indices is typical of the DAX, which reflects the state of the global economy much more strongly and accurately than they reflect the ups and downs of the German economy.
When economic data from China or the United States flashes up on the news tickers, the DAX is guaranteed to react.
Investors witness this spectacle on almost a daily basis, such as when the purchasing managers’ index for Chinese industry or the Chicago Purchasing Managers’ Index determines the fortunes of Germany’s stock exchange. Meanwhile, German gross domestic product, leading indicators from Germany’s Ifo Institute for Economic Research and Centre for European Economic Research and order intake in German industry have no influence at all on the market.