German equities showcased a notable advance in Monday's trading session as market participants processed the latest data regarding private sector activity and inflation from the eurozone's leading economy. The blue-chip DAX index followed its European counterparts, closing 1.53% higher. Preliminary data from Destatis indicates that Germany's annual inflation rate accelerated to 2.6% in December 2024, up from 2.2% reported the previous month, surpassing the consensus expectation of 2.4%.
The harmonized annual rate stood at 2.9%, demonstrating an increase from the prior 2.4% and exceeding the expected 2.6%. In parallel economic developments, the final HCOB Germany Composite PMI Output Index achieved a two-month high of 48 in December 2024. Despite this positive movement, the reading remains below the critical 50.0 threshold, which indicates economic contraction, largely resulting from a significant decline in manufacturing output that overshadowed a modest uptick in services business activity. Analysts have highlighted the resilience of services activity amid an ongoing manufacturing recession.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted, "It is pretty remarkable that services activity has remained resilient despite the prolonged manufacturing recession. Historically, services activity has closely mirrored manufacturing output, except for a few instances during the great recession of 2008/2009 and in 2019/2020.
This suggests that a growing portion of services is becoming more independent of industrial activity, highlighting the increasing role of services in stabilizing the economy." On the corporate front, Infineon Technologies ($IFX) emerged as the top performer for the session, climbing 8.26% at closing.
This surge can be attributed to a technology sector-wide rally spurred by Microsoft's announcement of an $80 billion investment in AI-enabled data centers. Additionally, Rheinmetall ($RHM) is set to supply Ukraine with further ammunition rounds for the Gepard anti-aircraft gun, under a contract funded by the German government and valued in the high double-digit million euro range.
However, the arms manufacturer's stock dipped by 1.37% at closing..