- Eastern European stock markets are booming –
+++Merz wants €500 billion special fund+++EU wants $800 billion for defence+++The debt avalanche is about to start+++Bond market crash+++DAX reaches new all-time high+++Trump starts trade war with increased tariffs+++Trump puts Selinskyi under pressure+++Will there now be a ceasefire in Ukraine? +++Trump introduces a new strategic crypto reserve+++Eastern European stock markets are booming+++ Warsaw and Budapest stock markets outperform++Ukraine top performer++
Events have been unfolding rapidly in recent days, and each event in itself can be described as ‘historic’ and as part of a turning point. The trigger was the scandal at the White House, when Trump and Selinskyi loudly exchanged words in front of the camera in a way that had never been seen before in the White House. Trump wanted to make a rust material deal with Selinskyi, but did not want to give any security guarantees. After this deal did not materialise due to the dispute, Selinskyi flew to London and was warmly welcomed by Prime Minister Stamer. Selinskyi immediately received a loan commitment from Stamer for 2.75 billion pounds. But the EU is also supporting Ukraine, with the exception of Hungary and Slovakia, and now even wants to spend €800 billion on defence. In addition, the CDU/CSU and SPD have agreed to have a special fund for infrastructure spending in the amount of €500 billion approved by parliament, and that before the change of government on 18 March. This would partially override the debt brake. So once again, election promises are not being kept. There were even rumours that the US would leave NATO, but these were fake news, which Merz fell for. However, Trump does want to move American soldiers from Germany to Eastern Europe.
Investors on the German stock market were enthusiastic about the ‘whatever it takes’ debt avalanche announced by Merz. On 6 March, the DAX shot up to a new all-time high of 23,419 index points, which meant a price increase of almost 17 per cent, but on 7 March it corrected sharply by 1.75%. At the same time, however, prices on the bond market collapsed, although the ECB lowered key interest rates by a further 0.25 basis points as expected. The US stock market, however, is suffering from the trade war initiated by Trump. But the Warsaw stock exchange performed much better (+24% for the PTX index). But Ukrainian equities (UTX index: +90%!) also benefited from Trump’s peace efforts.
Andreas Männicke gives his assessments of the new opportunities in Eastern Europe in his stock market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 247, but now also in the new BRICS-TV, episode 2 at www.YouTube.com. You can also register for the new BRICS TV channel on YouTube for free and order the new stock market letter BRICS Trends by emailing: info@eaststock.de. You can watch the second BRICS TV video ‘Trump against the BRICS’ here: . Please also register if you are interested in receiving the new BRICS newsletter. You can also read an introduction to the BRICS topic in VTAD News number 42. Here is the link to the new BRICS analysis from December 2024: https://www.vtad.de/wp-content/uploads/2024/11/vtad-news-42.pdf
Trump scandal triggers panic among politicians in the EU and Germany
After the scandal between Trump and Selinskyi on 28 March in Washington, where Selinskyi flew back to Europe without having achieved anything, without a planned raw materials deal and without security guarantees, there were harsh and panic-stricken reactions and truly historic political decisions in the EU and in Germany. Trump is now also questioning the transatlantic alliance and may withdraw military forces from Germany. Rumours are circulating that 35,000 American troops are to be relocated from Germany to Eastern Europe, mainly to Poland. But Hungary is also said to play a key role. However, Trump continues to strongly support Poland, which in turn strongly supports Ukraine. But Trump also wants Iran to be unable to build nuclear facilities and here Trump is now hoping for Putin’s support.
The EU wants to continue to support Ukraine to the best of its ability and is now seeking to become independent of the US after Trump’s unwillingness to provide security guarantees for Ukraine. But this also puts the continued existence of NATO at risk. Because a continued existence of NATO without the USA is inconceivable, panic is spreading in the EU and especially in Germany. The EU now wants to take on debts of USD 800 billion to make the EU ‘war-ready’ independently of the USA. This will have to be paid for mainly by the German taxpayer, whether he likes it or not.
Merz gets out the bazooka and dupes his voters
But even crazier is the proposal from the presumptive next Chancellor Merz, to have a ‘special fund’ (= debt) of €500 billion approved by the Bundestag before the change of government. This would partially override the debt brake. However, this also requires a change to the constitution, for which Merz needs a two-thirds majority. The Greens would then have to agree to this. One thing is already clear. Merz has already broken his election promise, because special funds are, after all, debts that the next generation will have to pay. In addition, the state’s interest burden is growing ever larger, especially since yields on the German capital market have risen sharply. The yield on 10-year German government bonds rose from 2.4 to 2.9%, which was close to the 2023 peak and the highest level in 30 years. If the proposal is accepted, the interest burden would increase by USD 15 billion each year, which cannot be generated at the moment. This can certainly be called a crash in the bond market. It is of little use that the ECB cut the key interest rate by 0.25 basis points to 2.5% on 5 March as expected. However, the ECB is not expected to cut interest rates again in the coming months.
Bundestag to decide on the bazooka (debt avalanche) on 18 March and amend the constitution
In this respect, it was quite astonishing that investors on the German stock market reacted so euphorically and catapulted the DAX to a new all-time high of 23,419 index points, which meant a high of almost 17 per cent. The MDAX and SDAX also rose by almost 5% in one day after Merz’s ‘whatever it takes’ clause and his planned bazooka. However, the special fund is not yet a done deal. It will not be decided until 18 March and in the German Bundestag, but now the Greens must also vote in favour.
Is there now a threat of ‘stagflation’?
It is also not yet clear whether this will really lead to as much more growth as Merz hopes for. If growth does not increase significantly, there will still be financial bottlenecks, as the interest burden will now rise enormously with a capital market yield of almost 3% for 10-year federal bonds, to €60 billion per year. In France, the interest burden already amounts to €60 billion per year, but France has a much higher debt than Germany. It seems likely that the next generation will have to foot the bill for this, or else the current legislature will resort to quasi-expropriation of the population. The state will come up with ways to get more taxes and compulsory fees. The savings deposits of citizens will probably be targeted, but so will property owners. In addition, inflation could rise. Moreover, the spectre of ‘stagflation’ is looming. In the fourth quarter of 2024, GNP fell by 0.5%. If GNP now only rises artificially due to high defence spending, this is not a productive and meaningful increase in value.
Wall Street under pressure due to Trump’s trade war
The American stock market, on the other hand, is not very enthusiastic about the trade war started by Trump. The Dow Jones Industrial Index fell from 45,000 to below 43,000 index points in February. Trump significantly increased tariffs against his major trading partners such as Canada, Mexico, China and the EU, which immediately led to countermeasures. The tariffs against Mexico and Canada have now been partially reduced for one month after both countries reacted with outrage by imposing high counter-tariffs. China is ready to take on the US and fight as long as it takes. China also wants to solve the Taiwan problem probably before the end of this year. This is about a new world order and also about a new world domination. China has also increased its military budget enormously.
FED in a dilemma
The trade war has only just begun, but the consequences, such as lower growth and higher inflation, will only emerge over the course of the year. Here, too, the USA is threatened with ‘stagflation’. US labour market data on 7 March was somewhat worse than expected. Only 151,000 new jobs were created instead of the expected 170,000. In addition, wage costs continued to rise. However, the US unemployment rate rose only slightly from 4.0 to 4.1%. This could mean that the Fed will not lower key rates as much as initially hoped. 10-year US treasuries still have a yield of 4.4%. With inflation rates remaining high, the Fed is now in a dilemma. If the Fed were to lower interest rates further, an inverse interest rate structure would indicate a recession or at least stagnation. The Fed’s key interest rates in the US are currently between 4.25 and 4.5 per cent. Analysts expect further interest rate cuts, but there is not much leeway left if inflation rises again due to the increased tariffs. It is questionable whether the Fed will lower interest rates again in March.
Trump issues a decree for a strategic crypto reserve, but will the Fed go along with it?
On 7 March, Trump decreed a strategic crypto reserve, as announced and expected. However, there was no longer any mention of the hoped-for purchase of 1 trillion bitcoins for the reserves. He also met with prominent representatives of the crypto scene on 7 March. Trump wants to make the USA the leading crypto country. The USA is to become the crypto centre of the world. This is hardly possible because cryptocurrencies are decentralised. But last year, BlackRock’s ETF alone quickly raised over USD 20 billion. The Trump family has already bought massive amounts of cryptocurrencies itself, most recently Ethereum (ETH), but also Bitcoin (BTC).
In addition to these two cryptocurrencies, Bitcoin and Ethereum, Ripple (XRP), Solana (SOL) and Cardano (ADA) are also to be included in the strategic crypto reserve. BlackRock is said to have invested large sums in Ripple in advance. The Ripple price had risen by over 400% from 0.5 to 3.2 USD/BTC in the wake of Trump’s election victory, and is now consolidating at 2.21 BTC/USD. Bitcoin recently fell from 93,000 to 83,000 BTC/USD. Is a new bull run or even a crypto crash imminent? However, it is likely that Trump will come into conflict with the Fed, both because of the strategic currency reserve in cryptocurrencies and with monetary and interest rate policy. It could happen that the economy performs worse than expected and Trump pushes for interest rate cuts, which the Fed does not want to make due to higher inflation rates. But that is a long way off for now.
At the moment, the USA has cryptocurrencies worth around 18 billion US dollars as a result of the confiscation and seizure of criminal transactions and fraud attempts. The taxpayer is not to be burdened by the acquisition of the strategic crypto reserve. Only cryptocurrencies obtained through fraud prosecutions will be added. Of the 21 million Bitcoins available, about 20 million have already been mined. Since the supply is limited, Bitcoin prices are likely to continue to rise in the medium term, but could slump again in the short term if the trade war escalates.
Trump wants a ceasefire in Ukraine and is putting pressure on Selenskyj
US President Donald Trump is now putting a lot of pressure on Ukrainian President Selinskyi to quickly bring about a ceasefire. But Trump also wants Ukraine to repay $320 billion with a raw materials deal. Selinskyi’s visit turned into a scandal because Selinskyi demanded security guarantees from the US that Trump was unwilling to give. Selinskyi then immediately sought and received protection from the EU and the UK. British Prime Minister Stamer immediately agreed to a loan of €2.75 billion for Ukraine as emergency aid.
EU and Germany with new avalanche of debt for defence in response to Trump
As the EU now realises that Trump no longer wants to give security guarantees and may want to leave NATO in the worst case, the EU now wants to spend 800 billion euros in debt on defence. France is even proposing that the EU come under the French nuclear umbrella, which would cost a lot of money. France is highly indebted at all levels. But France has fewer than 300 nuclear weapons, Russia has well over 5000. The UK also has fewer than 300 nuclear weapons, but without the USA, the EU is nothing even with further rearmament. Trump wants to reduce nuclear weapons together with China and Russia.
It would be better to immediately suggest a new policy of détente with Russia. The EU has failed diplomatically in this regard over the last three years. The plan to defeat Russia on the battlefield has failed. There have been no peace initiatives at all for years. Germany could have played a significant mediating role here, which Turkey is now taking on more. The peace treaty of 22 April 2022 should have been accepted, but the then British Prime Minister Johnson, together with Joe Biden, destroyed that. At that time, Ukraine would have been in a much better position.
Arms companies rejoice, but voters do not.
The presumptive new German Chancellor Merz, for his part, is proposing a special fund of €500 billion and now wants to reform the debt brake, which is exactly the opposite of what he promised before the election. On 18 March, the proposal is to be decided in the Bundestag before being handed over to the new government. Stocks such as Siemens, Heidelberger Materials, Hochtief, Strabag would then benefit from infrastructure spending, and, in the case of defence spending, Rheinmetall would continue to benefit, although all of these stocks have already risen sharply. This gigantic planned rearmament is madness anyway, especially since the USA is in the process of bringing about a ceasefire. Merz used Draghi’s saying ‘Whatever it takes’ to make it clear that now that the US has stepped aside, he sees no other option than to take on huge debts for the infrastructure, some of which is in a state of disrepair, and for defence, which the taxpayer will ultimately have to pay for.
Russia categorically rejects the EU’s peace proposal
Russia rejects the EU’s peace proposal for a ceasefire in the air and at sea. But Russia also rejects the proposal that EU peacekeeping forces should later secure the border, because Russia regards this as hostile NATO troops. However, it is completely unclear how security guarantees can be achieved without the US and how the border can be secured.
Trump with carrot and stick
Trump has now withdrawn all reconnaissance systems and intelligence information from Ukraine, so that it is no longer possible to fire on Russia from Ukraine because satellite data from the US is then missing. At the same time, Trump threatened Russia with new sanctions if Russia continues to bomb Ukraine as heavily as it is doing at present. Russia now also wants to regain the Kursk region at all costs, which the Ukrainians had surprisingly taken with elite units. Trump now wants to meet with Putin and Selinskyi in Riyadh to discuss a framework agreement for a ceasefire. This is only a framework agreement for a possible ceasefire, not yet a peace agreement. But it would be a first step in the right direction, but we are still far from a peace agreement.
Will there be a coup in Ukraine soon?
In Ukraine, there are allegedly efforts within the opposition to remove Selinskyi and call new elections. The war has indeed created a kind of dictatorship in Ukraine. Parliament has been suspended. Selinskyi, who is resistant to advice, has decided everything on his own. Most decisions were made under Selinskyi’s control. The propaganda is very strong, just like in Russia. The people also finally want peace, especially since a victory over Russia seems hopeless. There are now heavy losses in the Kurs region. It is questionable how long Selinskyi will survive this, even though he is repeatedly treated like a hero in the West. There are rumours that he has been offered to flee to Italy.
Where is the aid money from the USA and the EU?
Selinskyi himself allegedly does not know where all the US funds have gone and apparently there is also insufficient control over the funds. Of the $177 billion pledged by the US Congress, Selinskyi has allegedly only received $76 billion. There are only sanctions against a few allegedly corrupt oligarchs, such as against former President Poroshenko. But how corrupt is the government apparatus really? There have been far too few investigations, but this may change after the war. No one really knows where the €140 billion from the EU and the €40 billion from Germany for Ukraine have ended up, and no one is monitoring it closely.
DAX at new all-time high, but crash on the bond market
The outcome of the talks in Riyadh will be of some importance for the world stock markets and world peace. There are now very different developments on the world stock markets. The DAX benefited from the announced new debt avalanche and reached a new all-time high. On Friday, however, the DAX corrected sharply by 1.75% to 23,000 index points, which was still a price increase of 15% since the beginning of the year. In contrast to the German stock market, prices on the bond market plummeted. The yields on 10-year German government bonds rose sharply from 2.4 to 2.8%. The Euro-Bund future collapsed from 132 to 127. This means significantly higher interest costs for the state, but also for real estate loans. The expected interest rate cut by the ECB by 2.5 basis points to 2.5% was of no use here. The euro rose sharply in the last few days from 1.4 to 1.08 EUR USD.
By contrast, the US indices are currently suffering from Trump’s unpredictable tariff policy, but also from persistently high capital market interest rates (4.4% for 10-year US government bonds). The 7 ‘magic’ high-tech stocks from the USA have recently had to give up ground, especially Tesla from 450 to 250 USD, Amazon from 240 to 200 USD and Nvidia from 140 to 110 USD. The NASDAQ has already fallen by 5.6% this year to 18,196 index points. However, the Japanese stock market is also very weak at the moment (Nikkei 225 index down 6% to below 37,009 index points!), while Chinese stocks are gradually becoming fashionable again. For example, Tesla‘s share price plummeted from over 450 to 260 USD since its high in December 2024, while BYD’s rose from €32 to €42. Elon Musk’s slash-and-burn approach to US bureaucracy apparently also had an indirect negative impact on Tesla’s share price. However, Tesla still has a P/E ratio of 100, which is only partly justified by the AI fantasy.
Eastern European stock markets are booming
But stocks from Eastern Europe have been doing much better for a long time, above all the stocks from Poland (PTX index +25%), Hungary (HTX index +16%), Czech Republic (CTX index +15%) and especially from Ukraine (UTX index +87%!), which once again clearly outperformed the DAX and even more so the S&P index. In Ukraine, the pre-bets on a Trump deal are already heating up, with agricultural stocks in particular in high demand. This is the Trump Trade 2.0, but it is speculative since a ceasefire is not yet a done deal. We will have to wait for the next talks in Riyadh, which could be groundbreaking.
Inform yourself first, then invest
Find out more about the background and development of the Ukraine/Russia crisis, but also the future recovery potential of undervalued Eastern European equities. There are also new opportunities in the Baltic states, Southeastern Europe and the CIS republics (Kazakhstan, Georgia), with the respective stock indices all up in 2023. In 2023, 12 stock exchanges from Eastern Europe were among the 30 best-performing stock markets in the world, with five clearly outperforming the DAX. In 2024, 9 stock exchanges in Eastern Europe were once again able to outperform with a strong plus. And at the beginning of the year, there were already 4 stock exchanges in Eastern Europe that clearly outperformed the DAX. So it’s still worth looking beyond the end of your nose to Eastern Europe.
So order a trial subscription now (3 issues by email for just €15) of the monthly stock market letter EAST STOCK TRENDS (EST), which includes another Ukraine/Kazakhstan special and a dividend special, as well as lots of background information and new investment suggestions, such as the ‘share of the month’ and lucrative certificates at www.eaststock.de, there under Börsenbrief. The last EST was published on 28 February 2025.
TV/Radio Notes: On 5 February 2024, Andreas Männicke was interviewed by Carola Ferstl on Money Talk about gold, commodities and the new opportunities in Eastern Europe. On 5 December 2024, Andreas Männicke was interviewed by Heinrich Leben on Börsenradio Networks about the new opportunities in Eastern Europe, particularly in Ukraine after the end of the war. You can download all radio and TV interviews in the video archive at www.eaststock. de, including the last video in EastStockTV, episode 247. By the way: Have you already subscribed to the new YouTube channel – BRICS TV, in addition to the YouTube channel EastStockTV? Here is the link to the second BRICS TV video: https://www.youtube.com/watch?v=_zN-qTv0xz4
Reading note: In the new issue of VTAD News No. 42, Andreas Männicke provides a detailed report on BRICS as a new investment opportunity. Here is the link to the article: https://www.vtad.de/wp-content/uploads/2024/11/vtad-news-42.pdf
Seminar note: If you are interested in new Eastern Exchange seminars ‘Go East’ or a BRICS seminar in Frankfurt/M or other cities, please contact the EST editorial team (www.eaststock.de). If you are interested in Eastern stock market webinars and BRICS webinars, please also register.
You can now also order Andreas Männicke’s free newsletter with the latest news about the world and Eastern stock markets and the BRICS at www.eaststock.de. Please also register at info@eaststock.de if you are interested in a new BRICS newsletter from Andreas Männicke.