DAX 40 Tests 25K After Merz “Disaster” Election

The DAX 40 is holding just above 25,000 after a weekend state election that Chancellor Friedrich Merz himself called a “disaster.”

The far-right AfD won Mecklenburg-Vorpommern for its second state victory in two weeks, while Merz’s CDU polled below the 5% threshold needed to enter parliament. Markets have shrugged it off so far, but the index is already about 4.5% below its record high and its chart is showing signs of fatigue. The result also lands on an economy where energy costs, struggling carmakers and a lack of AI exposure are all weighing.

Latest Market Moves

DAX 40 is up around 0.5% at roughly 25,400 in early Monday trade, recovering some of Friday’s 1.6% slide to a close of 25,304, its lowest level since late July.

Brent crude has slipped about 2% to just under $102 a barrel as of Monday morning, its lowest since 10 September, on hopes of diplomatic progress in the Iran conflict and a partial recovery in Saudi exports.

EUR/USD is holding near 1.1480 in Monday’s European morning, down about 0.1%, showing little reaction to the election result.

On Wall Street on Friday, the Nasdaq 100 climbed 0.7% and the S&P 500 rose 0.2%, while the Dow Jones fell 0.2%.

Merz Takes the Blame

Sunday night was a bruising one for the chancellor.

The AfD won Mecklenburg-Vorpommern with about 38% of the vote, ahead of the SPD on roughly 35%, while the CDU took 4.9%, just short of the 5% needed for seats.

It follows the AfD’s win in Saxony-Anhalt two weeks ago, where it took almost 44% and fell three seats short of a majority. In Berlin, the far-left Die Linke topped the poll for the first time with about 26%, ahead of the CDU on roughly 19%.

Merz called the Mecklenburg-Vorpommern result “a disaster,” saying his party had been “squeezed out” as the race became a two-way contest. Other parties still refuse to govern with the AfD, so none of this changes national policy overnight. But it is hard to read the results as anything other than a partial verdict on a government that has yet to fix Germany’s economic and industrial problems.

Oil and Autos Squeeze German Industry

Germany’s economic problems were already piling up before the vote.

As a major energy importer, Germany feels every move in oil, and Brent is still above $100 a barrel amid the conflict with Iran. The ECB raised rates to 2.5% on 10 September, following an earlier hike in June, after energy costs pushed eurozone inflation to 3.3% in August.

Carmakers are the clearest casualty, with Volkswagen cutting its 2026 operating margin guidance on Friday to no more than 1% from 4-5.5%. The cut came with a €6 billion write-down on its Porsche stake and a 20% fall in first-half China sales. Volkswagen shares dropped about 5.6% while Mercedes-Benz and BMW each lost more than 4% in sympathy.

Other Headwinds for the DAX

Beyond energy and cars, several other pressures are building.

Europe has few genuine contenders in the AI race, so the investment boom lifting the Nasdaq 100 is largely passing German equities by. European chip names such as Infineon and ASML rose on Friday even as carmakers sank, but they are the exception rather than the rule.

Berlin adds a new risk, with the winning Left party pushing for the nationalisation of major housing companies, a direct threat to landlords such as Vonovia. The week ahead brings PMI surveys on Wednesday and the Ifo business climate index on Thursday, when Trump also meets China’s Xi Jinping in Washington.

The Chart: A Wedge Losing Momentum

The weekly chart shows an uptrend that is still intact but running low on momentum.

The DAX has been climbing inside a rising wedge since late 2024, with both trendlines sloping higher and converging as each push to a new high delivers less. The index peaked near 26,600 in late August and has since pulled back into the 25,000-25,500 zone that capped rallies earlier this year.

The weekly RSI has been making lower highs since spring 2025 even as the index pushed to new records, a bearish divergence that points to fading momentum. Holding above 25,000 keeps this a correction within an uptrend, but a weekly close below it would raise the risk that late August marked a top, with the lower wedge line in the mid-23,000s the next area to watch.

Source: SpreadEx | Germany 40, Weekly Chart