The Coming Week in Europe: Dax Index Likely to See New Highs

Cyclical shares, underpinned by healthy demand for tech stocks, are pushing the German index higher.
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BERLIN -- A highly unscientific

TSC

polling of preferred Christmas gifts here has revealed local children to be surprisingly precocious. Rather than the latest

Pokemon

toy or a

Sega

Dreamcast

game console, these kids are hoping Santa Claus will bring them a well-balanced mix of German cyclical shares.

The request makes sense: The recovery of Europe's largest economy appears to be well underway, pushing up the shares of industrial and other growth-sensitive companies. Festively, the

Dax

stock index has hitched its reindeer a string of record highs in recent days.

While the kids have another week to wait before they see whether their requests made it to the North Pole, Continental and American investors appear impatient. That should all but insure the Dax is driven to new highs in the coming week as growth-sensitive stocks remain in demand.

On Friday, cyclical shares, underpinned by a healthy appetite for technology stocks, pushed the index to an all-time high of 6443, although the traders, perhaps in a hurry for a holiday eggnog, let it slip from that level at the close. For next week, investors appear poised to head toward the end of the year at a breakneck pace. The latest surge in momentum came from last week's

Ifo

economic institute report on German business confidence, which hit a 1 1/2-year high, but as

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reported back in

July, this has been long expected. (Point of interest: Since that story ran, the Dax has risen 19.2%.)

However, not to be shown up by stuffy old concerns, like machinery maker

MAN

and engineers

Thyssen-Krupp

and

Linde

, telecom and tech companies should also make their presence felt next week. The

Mannesmann

(MNNSY)

-

Vodafone-Airtouch

(VOD) - Get Report

drama will continue to play itself out and software house

SAP

looks set to continue its nosebleed ascent.

German investors likely won't be the only ones getting in on the action, however. France, the Continent's second-largest economy, has been steaming ahead for months and now that the country's Teutonic neighbors (and most important trading partners) are back on their feet, things should continue to improve.

On Friday, the French institute

INSEE

said the country's gross domestic product should grow by 2.8% in 1999. "INSEE's forecasts suggest that total growth next year might be closer to 3.5% than 3.0%, although it is not making such a strong prediction formally at this stage," says

PaineWebber International

economist David Brickman.

Although

TSC

's sampling did not cross national borders, the forecasts for better growth might imply that Parisian children won't be getting stockings stuffed with

Asterix

. Instead, Pere Noel might load them up with cyclical presents, as well.