By Prof. Dr. Jan Viebig, Chief Investment Officer, ODDO BHF SE.

"The reporting period for the second quarter is beginning. We are maintaining our high weighting in European equities."

Three surprises are currently shaping the European equity markets: 1) the rise of the DAX so far this year, 2) which stocks and sectors have driven the upturn on the German stock market to date, and 3) the significant performance gap between the German and French stock markets.

In the first half of 2025, the DAX rose by around 20 per cent, while the CAC40, including dividend payments, gained just under 7 per cent (see Fig. 1). Judging by the news, there are not many reasons why German equities should be performing particularly well at present: the key sector of the German economy, automotive manufacturing, is under pressure from all sides. The US is protecting itself with import tariffs. At the same time, Chinese exporters are trying to gain market share worldwide – not least in Europe – in the promising electric mobility business. Economic growth in Germany is struggling to stay above zero.

The CAC 40 is similar to the DAX in many respects. According to Bloomberg, the DAX currently represents a market capitalisation of almost €2.2 trillion, while the CAC represents just under €2.5 trillion. For most companies in the DAX and CAC 40, Europe is the most important sales market. However, America and Asia also play a major, and in some cases very significant, role for many of them. Companies in both countries face similar challenges: sluggish productivity and economic growth in their home markets and economic uncertainty due to US trade policy. Another similarity is the ECB's monetary policy, which provided further relief on the interest rate front in the first half of the year.

In addition, financing conditions on the bond market are similar for issuers in both countries. A comparison of the yields on French and German corporate bonds (measured by the French and German versions of the Bloomberg Euro Aggregate Corporate Index) reveals only minor differences in yields and spreads. Credit quality, liquidity and maturities determine the level of financing costs for European companies on the bond market, while ‘nationality’ (the company's registered office) does not currently play a significant role.