German Markets Tumble as Merz's CO₂ Warning Shakes Investor Confidence
German markets faced a turbulent day as political and economic pressures weighed on investor confidence. Chancellor Friedrich Merz’s remarks at the Munich Security Conference sparked sharp declines in key sectors, while the DAX struggled to hold above the 25,000-point threshold. Meanwhile, crypto markets remained under strain, with Bitcoin lingering near $67,000 amid heightened fear among traders. Chancellor Merz used his speech in Munich to warn of a 'new global disorder' and a growing divide between Europe and the U.S. His call for a delayed and restructured CO₂ pricing system within the EU Emissions Trading Scheme sent immediate shockwaves through markets. The price of CO₂ allowances dropped by roughly 7 percent, settling at around €71 per tonne. Construction giant Heidelberg Materials saw its shares plummet by nearly 10 percent in response.
The broader DAX index failed to break past the psychologically significant 25,000-point level, despite a slight uptick in U.S. inflation data. January’s figures showed a headline rate of 2.4 percent and a core rate of 2.5 percent—both marginally below expectations. By the close, the DAX edged up by just 0.25 percent, finishing at 24,915 points. Not all assets suffered, however. Deutsche Telekom stood out as a rare bright spot, surging over 6 percent as investors sought safer options. Elsewhere, Siemens quietly overtook SAP to become the DAX’s most valuable company. Beyond equities, the crypto market continued its slump, with Bitcoin stuck around $67,000 and the 'Fear & Greed Index' firmly in 'Extreme Fear' territory.
Merz’s comments on CO₂ pricing and geopolitical tensions left a clear mark on markets, dragging down carbon-linked stocks and keeping the DAX subdued. While some blue-chip names like Deutsche Telekom provided stability, broader uncertainty persisted. With inflation data offering little relief and crypto sentiment remaining weak, traders now face a wait-and-see period ahead of further policy signals.
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