Germany's benchmark DAX, -0.99% logged a 22% gain, which not only exceeds the performance of almost any other index in Europe and the U.S., but also marks the strongest quarter since the three months to June 2003. That was back when the U.S. had just invaded Iraq, Tony Blair was still prime minister in the U.K. and Europe launched its first voyage to Mars. "It's been a perfect storm of good news for the DAX," said Michael Hewson, chief market analyst at CMC Markets. "It's the most export-oriented index so it benefits from a weaker euro, and you've got lower oil prices, QE tailwind and an economy in good shape." The euro EURUSD, -0.81% has shaved off 11% against the dollar in the first quarter, making European-produced goods cheaper for buyers overseas. That's great news for Germany' big export companies such as Siemens SIE, -0.47% SIEGY, -1.34% BMW BMW, -0.68% and Merck MRK, -1.83% Additionally, the German manufacturers are heavy users of energy, so the historically weak oil price has helped the companies keep expenses low, which also buoys stock prices. And then, of course, there's the ECB's €60-billion-a-month bond-buying program that has beefed up equities across all of Europe over the past month. Maybe expect for Greece, but that's a whole different story. Read: Super-bull Mark Mobius: Greece is so cheap right now, we're already buying Outside Europe, German-related assets have also performed well. The Recon Capital DAX Germany ETF DAX, -1.97% the only U.S.-listed ETF to track the DAX, is up 10% for the quarter, easily jockeying past quarterly gains of 0.5% and 1% for the Dow Jones Industrial Average DJIA, -0.57% and S&P 500 index SPX, -0.44% respectively. "We continue to see outperformance throughout the rest of the year," said Kevin Kelly, managing partner of Recon Capital. "If you look at other quantitative-easing programs they were also multiyear stories, but what's different about this QE program in Europe is that we're also seeing lower input costs via energy. That's really helped push this rally." Index First-quarter performance Germany's DAX 22% Stoxx Europe 600 16% France's CAC 40 18% The U.K.'s FTSE 100 3.2% Italy's FTSE MIB 22% Spain's IBEX 35 12% Greece's Athex Composite -6.1% Other analysts, however, said the DAX's glory days may be over. Hewson from CMC Markets forecasts that investors will start banking profits in the second quarter, while Barclays strategists argued that Italy's FTSE MIB FTSEMIB, -0.44% and Spain's IBEX IBEX, -0.07% could start outperforming the German benchmark. "The remarkable speed of euro depreciation seen has rarely been sustained in the past," the Barclays analysts said. "If the pace of euro depreciation decelerates hereon, investors may shift focus away from weak euro plays to stocks leveraged to the domestic economy." With that advice, Barclays echoed calls from Credit Suisse and J.P. Morgan that earlier in March suggested switching out of the export plays, such as Germany, and into the more domestically-driven periphery. Source: MarketWatch
