DAX Falls After Russian Sanctions

German investors are feeling the pain of escalating tensions with Russia that may have already pushed Europe’s largest economy into reverse.

The country’s main stock index has fallen by 11% from its peak in late June on fears of a trade war. That means the market is now technically in a “correction.”

The DAX index is comprised of 30 major companies such as Adidas (ADDYY), Volkswagen (VLKAY), Siemens (SIEGY) and Deutsche Bank (DB). It was down about 1% Friday, alongside other major European indexes, and has lost 6% so far this year.

Europe, the U.S. and other Western nations have issued increasingly tough sanctions against Russia over its role in destabilizing parts of Ukraine.

Russian President Vladimir Putin responded this week by banning various food imports from the U.S., Europe, Australia, Canada and Norway.

Several companies have already warned of damage to come, and economic data have soured as businesses postpone big spending decisions. Germany is Russia’s biggest trading partner in Europe and thus has most to lose.

Now Russian leaders are considering further retaliatory measures, including closing off the country’s airspace to European and U.S. airlines. That could cost European airlines $30,000 each flight if they’re forced to fly longer routes to Asia, Russian media have reported.

Shares in Germany’s Lufthansa (DLAKF) fell nearly 3% Friday.

“We are potentially ready to introduce protective measures in aircraft building, shipbuilding, automobile manufacturing industries and in other sectors,” said Russian Prime Minister Dmitry Medvedev.

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza