DAX 30 Rejected Again at 15,800; ZEW Sentiment Slumps on Gloomy Outlook
Key Talking Points:
DAX 30 battling to find direction as buyers and sellers go head to head
The ZEW economic sentiment indicator drops more than expected to 40.4
The tantrum we saw yesterday in commodities hasn’t really helped settle the mood in the markets, keeping equities subdued. The DAX 30is struggling once again to build gains above 15,800 having being rejected for a third time since mid-June, with the drop in gold and oil likely spooking sentiment away from consolidating higher.
DAX 30 Daily chart
The daily chart is showing again a clear picture of indecision, with yesterday’s candlestick having no body at all and today’s set up following the same pattern so far. Momentum indicators are showing willingness on behalf of buyers with the RSI sitting comfortably on the 60 mark whilst the stochastic is settling above 80, but sellers remain strong around 15,800 and it is likely going to take a big build-up in momentum to break above this area, so we’re likely to see the DAX trading lightly between 15,780 and 15,720 in the next few sessions in the absence of a catalyst.
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One of the reasons behind the weakness in commodities in the last few sessions is concern about rising cases of the Delta variant in both the US and China, which is causing demand to weaken. Cases in the US have risen to a 6-month high whilst China is also dealing with the effects of recent devastating flooding, which is making it more difficult to contain the new outbreaks.
In Europe, we had the ZEW economic sentiment index out this morning, dropping more than economists had forecasted and painting a rather gloomy picture. The index was expected to fall further to 56.7 in August against a 63.3 reading seen in the previous month, but the actual figure came in at 40.4, the worst reading since November 2020.
ZEW President Achim Wambach said, “expectations have declined for the third time in a row. This points to increasing risks for the German economy, such as from a possible fourth covid-19 wave starting in autumn or a slowdown in growth in China.”
The reaction in the DAX 30 has been very limited but it isn’t uncommon that the equity space reacts a little slower than other assets, so it may be the case that this negative reading builds on top of the already dampening sentiment and will then take the index lower in the next few days.
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— Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
European Equities: German Business Sentiment in Focus Early in the Session
Wednesday, 25th August
German Ifo Business Climate Index (Aug)
Thursday, 26th August
GfK German Consumer Climate (Sep)
The Majors
It was a mixed day for the European majors on Tuesday.
The DAX30 rose by 0.33%, while the CAC40 and the EuroStoxx600 saw losses of 0.28% and 0.02% respectively.
Economic data was on the lighter side, with the German economy back in focus. Better than expected GDP numbers from Germany delivered the DAX with the support to buck the trend on the day.
For the broader market, FED uncertainty and concerns over the Delta variant continued to weigh, however.
The Stats
It was a quieter economic calendar through the European session, with German GDP numbers in focus.
In the 2nd quarter, the German economy grew by 1.6%, quarter-on-quarter, recovering from 1st quarter 1.8% contraction. Economists had forecast growth of 1.5%.
According to Destatis, the economy grew by 9.8%, year-on-year, versus a forecasted 9.6%. In the 1st quarter, the economy had contracted by 3.3%.
From the U.S
New home sales figures for July were in focus, which had a muted impact on the European majors.
The Market Movers
For the DAX: It was a bullish day for the auto sector on Tuesday. BMW and Volkswagen led the way, with gains of 2.04% and 2.11% respectively. Continental and Daimler ended the day up by 1.71% and by 1.25% respectively.
It was also a bullish day for the banks. Deutsche Bank and Commerzbank rose by 1.28% and by 0.87% respectively.
From the CAC, it was a relatively bullish day for the banks. BNP Paribas and Credit Agricole rose by 0.68% and by 0.69% respectively, with Soc Gen gaining by 0.59%.
It was also a relatively bullish day for the French auto sector. Stellantis NV and Renault saw modest gains of 0.26% and 0.90% respectively.
Air France-KLM surged by 5.58%, with Airbus SE rising by 1.56%.
On the VIX Index
It was back into the green for the VIX on Tuesday, ending a 2-day losing streak.
Following a 7.60% decline on Monday, the VIX rose by 0.41% to end the day at 17.22.
Story continues
The NASDAQ rose by 0.52%, with the Dow and the S&P500 ending the day up by 0.09% and by 0.15% respectively.
The Day Ahead
It’s another relatively busy day ahead on the Eurozone’s economic calendar. The German economy is back in focus, with Business IFO Climate Index numbers in focus.
With business investment a key component of the economic recovery, the numbers will influence.
From the U.S, durable goods orders and core durable goods orders for July will also provide direction late in the day.
With the Jackson Hole Symposium just around the corner, however, we can expect some caution…
The Futures
In the futures markets, at the time of writing, the Dow Mini was up by 3 points.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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DAX Edges Higher As Fed Taper Worries Ease
(RTTNews) - German stocks were moving higher on Monday after Fed Chair Jerome Powell’s comments indicated policymakers were in no hurry to exit stimulus and move towards raising rates.
The upside, however, remained capped after the Wall Street Journal reported that Beijing is looking at new rules that would restrict domestic internet firms from going public in the U.S.
In economic releases, Eurozone business and household confidence declined slightly in August, following July’s record high, the European Commission said.
The economic sentiment indicator, an aggregate measure of business and consumer confidence, dropped to 117.5 in August from 119.0 in July.
Focus now shifts to August inflation data for Germany due later in the day ahead of next week’s meeting of European Central Bank policymakers.
ECB chief Christine Lagarde last month promised sustained support for the single currency zone, saying the central bank has learned from the errors of past crises and won’t derail the current economic recovery by withdrawing emergency support too early.
The benchmark DAX rose 40 points, or 0.3 percent, to 15,891 after closing 0.4 percent higher on Friday.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.