Major stock indices are substantially lower today, with Dax 30 losing around 1.5%, while UK 100 FTSE opened higher but reversed lower soon. In the US, Medicare price increases set off the Dow’s downward trend. Later, Tesla stated that last month’s sales were significantly fewer than expected.

However, the stock markets are also severely overbought, so it is the time for a pullback before pushing further to the upside. Another reason which might be contributing to this pullback is higher interest rate projections, as traders begin to reverse planned rate cuts. Expectations for a June FED rate cut have dropped to approximately 58%.

Is Cannabis Legalization Pulling Dax Down?

Regarding the DAX index specifically, which represents Germany’s top 30 companies, it has shown remarkable performance recently, rising by approximately 15% to reach a new all-time high, but it is time for a retrace. Nevertheless, this demonstrates investor confidence in the German economy and its leading companies.

However, Germany’s partial legalization of cannabis and its potential impact on workplace policies hasn’t affected the performance of the main German index stock DAX. The legalization of cannabis may lead to changes in laws and regulations surrounding its use, but whether smoking marijuana will be allowed in the workplace in the future depends on various factors including government regulations, workplace policies, and attitudes toward drug use, so I don’t think it will be a burden on German companies.

Germany March final manufacturing PMI Released by HCOB – 2 April 2024

In the commentary, HCOB notes that:

“The PMI figures are a good forecaster for the production figures of Destatis. Interestingly, the value-added figures – a methodologically different indicator to the production figures also published by Destatis – present a less dire picture. Comparing data from the start of 2022, production has seen a nearly 7% decline through the end of 2023, which is consistent with PMI data. In contrast, value added has only dipped by 0.6% over the same period. This suggests that the widely discussed trend of deindustrialization in Germany may not be as pronounced as production data indicate. Indeed, the share of manufacturing value added as a portion of the total economy remains at 22.3%, surpassing the 33-year average of 22.0%.

“The PMIs are sending mixed signals with respect to the inventory cycle. The index for the stock of finished goods has continued its recovery and indicates for the first time in 12 months a rise, even if it is marginal. However, stock of purchases fell in March at one of the fastest rates since 2009. Thus, it seems that Germany is not yet part of the turn in the inventory cycle we saw globally in February, which is surprising, given the high degree of openness of the German economy.

“The crucial forward-looking new orders index has shown a slight uptick recently. However, there is no discernible reversal in the downward trend of orders that has persisted since the spring of 2022. This pattern holds true for backlog of works as well. Despite a near two-year decline in backlogs, order books remain far from empty, as highlighted by the range of stock of orders data provided by Destatis. It’s worth noting that those figures represent the average stock of order books, encompassing significant outliers such as the aerospace sector with a range of 42 months, alongside industries like chemical products, which exhibit a much narrower range of only 1.6 months.”

Dax 30 Live Chart