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The Hannover Re share

Turbulent stock market environment

The stock market environment in 2011 was overshadowed in particular by the European sovereign debt crisis, which caused considerable volatility and uncertainty among market players. Concerns about the stability of the single currency and the ability of Greece, Portugal and Italy to refinance weighed especially heavily on financials and bank stocks, with in some cases substantial write-downs having to be taken on the affected government bonds. The development of the real economy was not, however, reflected on stock markets. Most strikingly, the German economy proved to be surprisingly resilient. In light of the expected corporate profits, analysts therefore anticipated an average increase to as much as 7,750 points on the German DAX share index at the beginning of the year.

It was indeed the case that the DAX began 2011 at 6,914 points and climbed to a three-and-a-half-year high of 7,600 in the subsequent months until May. Yet just a few months later, in September, this was followed by a plunge of more than 2,500 points to a low of 4,966. After a modest rally the DAX ended the year down by 14.7% at 5,898 points, coming in significantly below original expectations. The MDAX similarly posted an appreciable loss of 12.1% in the same period and closed the year at 8,898 points. Only the Japanese Nikkei index performed more poorly, declining by 17.3% year-on-year to a level of 8,455. The exception was the US Dow Jones index which, despite the prevailing economic difficulties in the United States, high unemployment and the loss of the “AAA” credit rating, moved 5.6% higher on the year to close at 12,218.


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