DAX Index
The DAX index is under pressure as investors react to the ongoing political crisis in the United States and the rising number of COVID-19 patients in Europe. The index, which contains some of the biggest blue-chip firms in Germany, is down by 0.40%. Other indices in Europe like the FTSE 100 and CAC 40 are also in the red.
The DAX index is reacting to the ongoing political environment in the United States. With the election just a few weeks away, the political environment in the country has continued being volatile. There have been political violence in several major cities already. And in a statement yesterday, Donald Trump refused to say whether there will be peaceful transfer of power if he loses the election. The situation has been made worse by the fact that the election results could take a longer period than in the past.
The situation in the United States is important for German stocks in the DAX because most of these firms have a lot of business in the US. Companies like BMW, Volkswagen, and Daimler do a lot of their business in the country.
The DAX index is also falling because of the rising number of COVID-19 cases in several European countries like the UK, Spain, and Italy. This week alone, the UK has confirmed more than 10,000 cases and there is a possibility that the situation could worsen. This situation is likely to impact companies in the DAX because they do a lot of business there.
German stocks are also reacting to business climate and expectations data. The data from ifo showed that the business climate index, current assessment, and business expectations rose to 93.4, 89.2, and 97.7, respectively. All that was lower than what analysts were expecting.
Delivery Hero is the worst-performing stock in the DAX, down by more than 1.21%. It is followed by Infenion, BMW, Linde, and Heidelbergcement that are down by more than 1%. On the other hand, E.ON, Deutsche Wohnen, Vonovia, and Allianz are among the best performers.
The daily chart below shows that the DAX index is trading at €12,615, which is close to its lowest level on August 4. This price is below the 3rd September high of €13,452. It is also slightly below the 50-day and 25-day exponential moving averages. Most importantly, the price has moved below the ascending trendline that is shown in blue.
Therefore, I suspect that the index will continue falling as bears aim for the next support at €12,200. On the flip side, a move above €13,000 will invalidate this trend. This price is at the intersection of the ascending line and the lowest level on September 18.
