German equities experienced a steep decline on Tuesday amid escalating fears of a global trade war triggered by the recent implementation of new tariffs by the US government on China, Mexico, and Canada. The blue-chip DAX index closed the day at a notable 3.54% lower, reflecting the immediate market panic in response to these geopolitical tensions. The specific tariffs that have caused ripples in the market include a significant 25% levy on goods from Mexico and Canada, which had been anticipated but delayed for a month, now officially in effect.
Additionally, tariffs on Chinese imports have surged to 20%, confirmed by President Trump’s executive order. Deutsche Bank commented on the situation, noting that there remains doubt in the market regarding the longevity of these trade barriers. "We are clearly into unprecedented territory," they stated, indicating that the market may have difficulty adjusting to these new realities. Meanwhile, in Europe, the unemployment rate within the eurozone has stabilized at 6.2% for the last three months, showing resilience amid economic uncertainties; Eurostat data reveals that about 10.7 million individuals in the euro area were jobless as of January.
This situation highlights the ongoing challenges within the Eurozone labor market, contrasting with the expectations set for a minor uptick in the private sector business activity in Germany, as indicated by the upcoming PMI figures due for release on Wednesday. The anticipated growth in services, coupled with a gradual easing of the manufacturing slump, suggests a complex interplay between domestic economic performance and external pressures. On the corporate front, noteworthy adjustments are being made; Berenberg has heightened its price target for SAP, raising it to 299 euros from a previous 242 euros while maintaining a buy rating on the stock.
Despite the DAX's downturn, SAP shares, which slid 4.64% at closing, continue to be framed as a "safe haven" in large-cap software investments. Berenberg affirmed, "SAP's consistent track record of delivering resilient cloud performance has reinforced its position as a safe haven investment in the large cap software space." The firm indicated that they perceive minimal risk of this favorable investment narrative unwinding in the near term, suggesting that investor confidence in SAP remains relatively strong even amidst market volatility..