DE40: DAX hits a 2.5-month high 📈 Rheinmetall jumps on renewed Russia–Ukraine tensions

The German market is posting a strong trading session today, with Frankfurt-listed stocks rising broadly across the board. Overall sentiment across Europe remains positive, with gains also seen in London’s FTSE and Paris’s CAC 40. In recent weeks, European assets had been supported by hopes of an eventual end to the war in Ukraine. However, yesterday’s reports suggest that the prospect of a peace agreement may once again be receding. Russia accused Ukraine of carrying out a drone attack on one of Vladimir Putin’s residences near Lake Valdai, on the same day that President Volodymyr Zelensky was visiting Mar-a-Lago with a delegation. Moscow announced potential retaliation and signaled a hardening of its negotiating stance.

DE40 chart (D1 timeframe)

DAX futures are trading at their highest levels since October 13, breaking above 24,600 points. The index has rebounded by around 10% from its mid-November low, although trading volume in the futures contract has declined noticeably in recent days of 2025.

Source: xStation5

On the German stock exchange, the strongest gainers today include Rheinmetall, Infineon, Mercedes-Benz, and the banking sector; notably Commerzbank and Deutsche Bank. Meanwhile, Siemens and Deutsche Borse are under pressure. Shares of the Frankfurt exchange operator continue to struggle to sustain a meaningful rebound following their recent sharp declines.

Source: Bloomberg Finance L.P.

Are defense stocks back in favor?

The defense sector is performing particularly strongly today, as investors price in a scenario in which a peace agreement in Ukraine is delayed by several more months. The alleged Ukrainian drone attack on Putin’s residence has been condemned by China and India, while Donald Trump stated that the information he initially received from the Russian leader made him furious, although there is still no confirmation that the attack actually occurred.

• Commenting on the situation yesterday, Trump said he had halted deliveries of Tomahawk missiles to Ukraine, potentially signaling to Russia a willingness to support escalation should Moscow prove to be the party undermining negotiations by misleading the U.S. administration. Ukraine has denied that any attack on Putin’s residence took place.
• Russia announced it would tighten its negotiating position, with Foreign Minister Sergey Lavrov stating that Moscow currently holds the strategic initiative on the battlefield. He argued that Ukraine should agree to cede Donbas, the Kherson and Zaporizhzhia regions, as well as Crimea, to Russia. Lavrov also reiterated Moscow’s preference for security guarantees aligned with the ultimatum presented to the “West” in 2021, which he claims was never adequately addressed.
• This suggests that the concept of “U.S. security guarantees” which, according to remarks by Polish Prime Minister Donald Tusk, could involve an increased military presence near Ukraine’s border with Russia — remains unacceptable to the Kremlin at this stage. Under such conditions, Ukraine would effectively end up in a “grey zone” following the conflict.

This fundamental divergence, combined with the unresolved future of parts of Donbas, where Ukraine has constructed extensive defensive fortifications that Russia seeks to incorporate into its territory, currently appears to be pushing the prospect of peace further into the future.

Rheinmetall share price, RHM.DE (D1 timeframe)

Shares of the German defense giant are attempting to reclaim levels above the 200-day exponential moving average (EMA200, red line), rising by more than 2% today. Buyers are aiming to reverse the short-term downtrend, while the RSI indicator remains close to neutral. According to Goldman Sachs, the broad European defense sector index has risen by more than 70% this year, while Rheinmetall shares have gained approximately 150%.

Source: xStation5