Germany's DAX (^DAX +0.00%) index just can't make up its mind. The index gained about 0.5% over the past week, and while that's a small gain, it's times like that when German stocks look as though they're ready to pick up momentum for weary investors. However, the DAX hasn't been able to sustain any of that momentum throughout the year: It has fallen by about 0.7% over the past month and has gained little more than 5% year to date. That won't cut it for investors in Europe's largest economy hoping to buy in on Europe's lows.
But is the continent's top economy really ready to shake off the shackles of recession? As it turns out, the road back to economic respectability is a tough one -- even for Germany.
Trade in the spotlight
Germany is a nation built on trade, and rising exports mean positive outcomes for the country's top companies and stocks. That wasn't to be in July, however: Data emerged this week showing that Germany's exports fell 1.1% from June to July, far below the 0.7% rise predicted by economists. Industrial production also fell for the month.
German ministry officials claimed the data showed increasing strength as the country helps Europe dig out of recession, but it's the eurozone that's hitting trade the hardest. Exports to eurozone members fell 0.7% for the month, while exports to non-eurozone European nations actually rose.
The country will have to rely more and more on alternative trade partners in the future. While EU member nations are Germany's largest trading partners collectively -- with eurozone members especially important to the country's growth -- debt-plagued nations like Italy and Spain simply lack the fiscal resources to continue trade at its current levels until they solve their domestic challenges. Consumers in such countries won't be able to afford all of Germany's products in the age of austerity.
That has led Germany's top companies and their investors to look elsewhere. Chemical and pharmaceutical giant Bayer (BAYRY +0.83%) is looking East: The company hopes to grow sales in Russia by 80% from 2012's output to 2017. Considering that Russia is a strong emerging market, with analysts expecting its pharmaceutical market to record annual double-digit growth by the end of the decade, it's a route that Bayer could use to unlock growth as Europe slowly recovers.
Bayer is not just seeking geographical avenues for growth, however. The firm said this week that it will increase investments in its pesticide business as the agricultural industry booms. That market has played out extremely well for American competitor Dupont, which grew its agricultural unit's sales by 11% year over year through the first six months and has staved off falling sales at other business segments. If Bayer can keep it up, it will be able to weather Europe's ongoing economic doldrums and impress investors with strong growth.
