Volkswagen Adjusts Title Following Agreement Negotiation
Trading as Santa Steps Away
On the final trading day before Christmas, German stock market investors took it easy. The Dax was down a smidgen at 19,882 points by mid-day, while the MDax climbed 0.1% to 25,567 points. The Euro Stoxx 50 saw a slight dip of around 0.1%.
Following several consecutive losing days, the Dax had lost sight of the 20,000-point mark. Last week's Fed interest rate forecast prompted investors to cash in their winnings. Friday saw the Dax plummet to its lowest level since the beginning of the month, effectively dampening the previous year-end rally. Yet, there's still a solid gain of nearly 19% for 2024.
Volkswagen shares in a rollercoaster ride
Initial impressive gains in Volkswagen shares post the wage dispute agreement at Volkswagen didn't last long. While shares initially surged 1.6% at the opening of Xetra trading, reaching levels not seen since late October, they soon headed south. Volkswagen was the biggest loser among the 40 Dax stocks, ending the day down 2.5%.
Volkswagen announced plans to cut over 35,000 jobs by 2030, aiming for 1.5 billion euros in annual labor cost savings. The company also stressed new job security until 2030, with no immediate closures of entire plants. However, analyst Philippe Houchois at US investment bank Jefferies deemed the agreement insufficient, given the competitive landscape and the industry's challenging environment.
Defense stocks on the rise
The increased military spending by NATO countries in Western Europe boosted the shares of Rheinmetall, Hensoldt, and Renk by up to 3.8%. NATO Secretary General Mark Rutte expects increased pressure from the incoming US President Donald Trump for European alliance countries, like Germany, to do more. "He will want us to do more," Rutte told the German Press Agency in an interview.
While investors dumped DWS shares, the stock of the fund provider dropped by 1%. According to the "Süddeutsche Zeitung," the financial regulator Bafin initiated a special audit at the Frankfurt company, focusing on the handling of sustainability issues.
Borussia Dortmund's positive end to the year supported the share price, with shares included in the SDax rising by 1.4%. With 25 points and 6th place in the table, Dortmund is close to the Champions League spots.
Novo Nordisk shares staged a comeback.
The London Stock Exchange saw a final agreement on the takeover by rival Aviva boost British insurer Direct Line. Shares jumped 3.4% to 251.40 pence, while Aviva advanced half a percent to 459.30 pence, reflecting the agreed £3.7 billion (around €4.5 billion) takeover of Direct Line by Aviva. "Christmas has come early for Direct Line investors," commented Matt Britzman, analyst at investment firm Hargreaves Lansdown.
Meanwhile, in Copenhagen, Novo Nordisk's shares experienced a resurgence, climbing 9% after plunging over 20% on Friday. The company grappled with a setback in the development of the next generation of its weight loss injection. The drug CagriSema resulted in a 22.7% weight loss in obese patients in a critical phase 3 clinical trial, below Novo Nordisk's expectations of up to 25%.
Research reveals that despite job cuts, Volkswagen eliminated around 7,000 jobs in Germany as part of a broader cost-cutting strategy, targeting factory costs at the key VW brand. The company also decided to let the contracts of over 1,000 temporary workers expire at its Zwickau plant and planned to lay off 1,600 staff at the Cariad software unit by the end of 2025, representing around 30% of the division's workforce. However, the direct impact of these job cuts on Volkswagen's shares in 2024 is not clear. The economic challenges, including restructuring charges, regulatory fines, and rising production costs, limited profitability instead.
In 2024, Volkswagen faced a tough automotive sector, leading to a significant decline in net profit in early 2025 compared to previous periods.
In the context of the volatile stock market, technology giants, including Novo Nordisk, have shown resilience, with its shares staging a comeback after a steep decline. Meanwhile, the financial sector, specifically businesses like DWS, have witnessed a drop due to regulatory concerns. Furthermore, the surge in defense stocks, such as Rheinmetall, Hensoldt, and Renk, is a testament to the impact of rising military spending and geopolitical tensions on the technology and business landscape.
