Germany's Economy Picks Up Momentum As the DAX Adds to 2013's Gains

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Many markets overseas haven't matched the standards of investors in the U.S., who have become accustomed to the huge run-up of American stocks this year. That doesn't mean they're bad investments. German stocks have crept up slowly this year, and the DAX (DAXINDICES: ^DAX  ) added another 0.5% to its year-to-date gains this past week.

The DAX's 8% gains in 2013 haven't set the investment world on fire -- and it's certainly underperformed the likes of the S&P 500 (SNPINDEX: ^GSPC  ) , which is up more than 13% since the start of 2013 -- but there's value to be found across the Atlantic. Let's catch up with the latest from Europe.

Economies on the rise
Germany reported its second-quarter GDP data late this week, and Europe's leading economy continues to drive the continent out of recession. The economy grew by 0.7% for the quarter, eclipsing the 0.3% second-quarter gains made by Europe as a whole that finally dragged the region out of recession. For a nation built on exports and trade, however, it was spending at home that drove Germany's gains. Domestic demand accounted for 0.5 percentage points of that 0.7% gain.

The positive news was enough to push German Finance Minister Wolfgang Schaeuble to claim that German economic growth could be as high as 0.7% for the full year in 2013, higher than the government's projection of 0.5% full-year growth. Even Berlin's budget came in strongly, as the government reported a modest budget surplus for the year's first six months.

The increasing strength in Germany's economic foundation is creating a climate that investors can believe in -- even as Europe continues to face problems. Nations on the EU periphery still face debt and budget problems of their own, with Schaeuble claiming that Greece will need a third European bailout to solve its problems. Still, with quarter after quarter of bad news in the rearview mirror across the Atlantic, it's refreshing for investors finally to receive news of a broader European comeback -- all led by its strongest economy, which is finding its footing despite the troubles that have surrounded it for years.

For all that renewed domestic demand, however, some of Germany's leading companies are looking elsewhere for dollars. Telecom giant Detusche Telekom (NASDAQOTH: DTEGY  ) is combating American rival Level 3 Communications (NYSE: LVLT  ) for Polish telecom firm GTS Central Europe, according to sources cited by Bloomberg. GTS boasted annual revenue of 387 million euros last year, a nice sum that would help both companies further entrench themselves in mainland Europe. Level 3 already operates in 55 countries, so it's a natural fit to continue expanding internationally.

For DT, however, international expansion has become a core part of its business. The company's U.S. subsidiary, T-Mobile USA (NASDAQ: TMUS  ) , added more than 680,000 postpaid wireless subscribers in the second quarter as it squares off against rival Sprint for the No. 3 spot in the U.S. wireless landscape. DT increased its mobile contract subscription base in Germany by more than 400,000 customers in the second quarter, although even combined with T-Mobile's success, the company's still projecting full-year earnings below last year's results.

With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!

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  • Report this Comment On August 23, 2013, at 6:10 PM, NovaB wrote:

    Doesn't say a damned thing about the economy. It says these particular stocks as a group are doing better.

    So much journalism these days is misleading or outright disinformation.

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