The German stock market ended Monday on a somber note, with the prestigious DAX index plummeting 1.82%, following the confirmation that the private sector economy in Germany has slipped back into contraction during the month of July. This downturn has intensified concerns over the possibility of a looming recession for Europe's largest economy. The DAX index's decline was mirrored by other major European blue-chip indices which similarly retreated amidst a global market selloff driven by apprehensions regarding the overall health of the world's leading economy. In domestic reports, the S&P Global-compiled HCOB survey results highlighted a noticeable drop in business activity within Germany, which has reached a four-month low in July.
Specifically, the HCOB Germany Composite PMI Output Index plummeted to 49.1, down from 50.4 in June, despite a slight upward revision from the preliminary flash estimate of 48.7. The downturn in the indices was primarily influenced by the services sector, which experienced a consecutive slowdown in growth for the second month running.
The HCOB Germany Services PMI Business Activity Index fell to a four-month low of 52.5 in July, down from 53.1 in the month prior, with the flash estimate recording a slightly better figure of 52. Eschewing any optimism, Chief Economist Cyrus de la Rubia at Hamburg Commercial Bank warned, "The potential for growth to continue declining over the next months seems significant.
New business only saw modest growth in July, and backlogs have been steadily decreasing since mid-2023. Should stagnation occur within the service sector, we risk slipping into a recession as the manufacturing sector is already experiencing sharp contractions. Regrettably, the threat of a recession—defined as two consecutive quarters of negative growth—is no longer just a speculative concern, as the economy has already contracted in the second quarter." On a broader scale, the situation in the eurozone appeared slightly more encouraging, with business activity indicators presenting a more favorable outlook for July compared to Germany’s predicament.
Although the HCOB Eurozone Composite PMI Output Index did decline to a five-month low of 50.2—down from 50.9 in June and the preliminary estimate of 50.1—it remains in growth territory. Similarly, the HCOB Eurozone Services PMI Business Activity Index fell to a four-month low of 51.9 in July, down from 52.8 from the previous month. Focusing on corporate performances, Infineon Technologies ($IFX) saw its shares rise by 1.58% at market close, despite releasing its latest earnings report, which showed that attributable profits had more than halved, year over year, in the fiscal third quarter ending June 30.
The company also reported a decline in revenues amid ongoing market challenges. In a significant move, the German semiconductor manufacturer revealed plans to slash its global workforce by approximately 1,400 positions while relocating another 1,400 jobs to countries with lower labor expenses as a strategic part of its sustainability program..