DAX Hits 7,000 Points

Investors on Wednesday were apparently riding a wave of positive sentiment.

The DAX 30 began Wednesday with a gain of 0.23 percent at 6,999.18, but moments later it surged past the psychological barrier to strike as high as 7,005.34 points. Meanwhile London's FTSE 100 index rose by 0.11 percent to 6,419.40 and in Paris the CAC 40 won 0.34 percent to 5,732.80 points.

A robust global economy, corporate record profits, mergers, acquisitions and speculations are behind the market gains. Many companies have managed to reduce costs; good deals and appealing assessments are also helping to push up the stock market barometer.

Boom Year 2000

In Germany, it was January 2000 when the DAX last advanced beyond the 7,000 point mark. The rise continued for a while, and then came the shattering fall.

"In boom year 2000, things just ran wild, but conditions are different this time around," said Trudbert Merkel, fund manager at DekaFonds. "In the technology industry, people didn't pay attention to conventional balance sheets back then. They just focused on potential customers, sales and potential turnover in the future."

Optimism and euphoria pushed up values to the climax of nearly 8,065 points within a few weeks in March 2000. The seemingly endless prospects in the IT branch lured ever more investors who put their faith in getting rich quickly.

Then the bubble burst in the IT industry: disappointing corporate results, financial scandals, the Sept. 11 terrorist attacks in the US and a dramatic break in the global economy.

The DAX lost three-quarters of its value and dropped to an historic low of 2,202 points in March 2003. Since then, value has slowly but surely been climbing again.

"Healthy development"

"Stock market development is a lot healthier now," said chief economist at Helaba, Getrud Traud.

Exuberant optimism is not in the picture because the stock market boom passed by small investors. Stock is no longer considered a durable form of investing money and is viewed with suspicion.

According to figures from the German Stock Institute (DAI) -- an association of German exchange-listed stock corporations and other companies with interests in the capital market -- the number of stock investors dropped to its lowest point in 2006, to 10.3 million people.

Now, what is driving the market are fast-growing corporate profits.

"High profitability combined with good evaluations are always good for the markets," said Bernd Meyer of Deutsche Bank. Many companies have restructured themselves, gotten their books in order, halted peripheral business and moved production to countries with cheaper labor. "Global growth and low inflation provide a good environment for stock to increase."

Experts say investors do not have to worry that the breach of the 7,000-point mark is the beginning of the end; most of them do not anticipate a stock market collapse.

At most, they say, minor corrections can be expected along the way, with the DAX reaching 7,100 to 7,500 points by the end of the year.