Rising FTSE 100 and DAX 40: How Mining Gains and Global Exposure Are Beating Trade Tensions

The FTSE 100 and DAX 40 indices have hit record highs in July 2025, defying expectations in an environment of escalating trade wars and geopolitical uncertainty. The rally isn't driven by broad economic optimism—Germany's economy is stagnant, and the U.S. faces tariff-driven headwinds—but rather by sector-specific tailwinds and the resilience of companies with global revenue streams. Investors are now pricing in a “new normal” of trade tensions, and those who bet on commodities, defense, and multinational firms are reaping rewards. Here's how to navigate this landscape.

The Mining Boom: When Tariffs Backfire

The FTSE 100's surge has been fueled by mining giants like Anglo American (+4.8% this week), Rio Tinto (+3.9%), and Glencore (+3.7%). The irony? These gains stem directly from U.S. tariffs on copper imports, which have sent commodity prices soaring. While President Trump's 50% tariff on copper imports (effective August 2025) was framed as a blow to U.S. consumers, it's instead created a supply crunch that's boosted prices for miners worldwide.

Investors are adopting a “TACO” (Trump Always Chickens Out) mindset, betting that tariffs will either be delayed or diluted. Even as Brazil and Middle Eastern exporters face similar threats, traders are treating the volatility as noise. For now, mining stocks are the canary in the coal mine: their outperformance suggests markets believe commodity demand—and geopolitical risk—will persist long enough to justify higher valuations.

The DAX's Global Edge: Why Domestic Stagnation Doesn't Matter

Germany's DAX 40 hit 24,639.10 this week, defying the nation's economic malaise. The secret? 80% of DAX companies derive revenue outside Germany. This geographic diversification insulates them from domestic headwinds, as seen in the performance of:
- SAP: Up on AI-driven enterprise software sales.
- Rheinmetall: Surging 200% YTD due to defense spending from Middle Eastern and NATO allies.
- Commerzbank: Rising 90% on consolidation rumors and reduced exposure to European sovereign debt.

The German government's €1 trillion infrastructure and defense spending plan has further bolstered investor confidence, while the ECB's hinted rate cuts (25 bps) have sweetened the deal.

The Playbook for Navigating Tariffs as “New Normal”

1. Buy Commodities, But Be Selective
   Copper ETFs (e.g., COPX) and mining stocks with exposure to strategic metals (rare earth, lithium) offer leverage to tariff-driven supply constraints. However, avoid companies like Grafton (-7.6% this week), which rely on domestic construction demand.

2. Favor Multinationals Over Domestic Plays
   DAX constituents with global revenue streams—like SAP or Siemens—will outperform German domestic firms. The 13.9x forward P/E of the DAX versus the S&P 500's 19.5x suggests European equities remain undervalued.

3. Monitor Inflation and Rate Cuts
   Federal Reserve minutes hint at 2025 rate cuts to offset trade-related inflation risks. If inflation stays muted, equities will thrive.

The Risks: When “New Normal” Turns Toxic

The strategy hinges on markets continuing to shrug off tariffs as political theater. A “hard landing” scenario—where tariffs trigger slower global growth or higher inflation—could reverse the trend. Investors should set stop-losses and watch key metrics:
- Fed Funds Futures: Reflecting rate-cut expectations.
- Copper-to-Equity Correlation: A breakdown here would signal broader economic concerns.

Final Take: Play the Cycle, Not the Headlines

The FTSE and DAX's records aren't about economic fundamentals—they're about sector-specific cycles and geographic diversification. Investors who allocate to mining, defense, and global revenue-driven equities can capitalize on this dynamic. Just remember: when tariffs become the norm, the companies that win are the ones least reliant on any single country's fate.

Stay selective, stay global, and keep an eye on the Fed. The trade war may be here to stay, but so are opportunities to profit from it.