The DAX 30 index has erased earlier losses in the futures market as the Santa rally gathers steam. The index is up by more than 1%, adding to the 4.95% gains it made yesterday.
German stocks joined their global counterparts as the markets reacted to the impressive results by Pfizer and BioNTech. The two companies announced that their vaccine was successful and that they were waiting for emergency authorisation before rolling it out globally.
A vaccine would be a positive thing for companies in the DAX 30 index. For one, since BioNTech is a German company, there is a probability that it will get priority in its distribution. Also, the vaccine would help cushion the German economy from another recession, which would be a positive thing for constituent firms.
However, the biggest challenge is that the vaccine is yet to be cleared by the FDA and other global agencies.
Another risk is that the American economy, where most DAX index companies sell their products, is likely to go through a long period of election litigation. That is after the Attorney General accepted the lawsuits filed by Trump.
The DAX index will also react to corporate earnings from some of the leading companies. Henkel, the maker of Persil will release its earnings that are expected to show that consumer spending was strong in the third quarter. The same is true when Adidas and Infineon release their results later today.
On the daily chart, we see that the DAX 30 index has surged by 15% this month. The index has also risen in the past 8 trading days and is now at €13,080, which is a few pips below the September high of €13,442. The price has also moved above the short and longer-term moving averages.
Therefore, with other indices like the Nikkei 225 and Dow Jones reaching new highs, there is a possibility that the DAX index will follow suit. If this happens, the next level to watch is the September high of €13,442. On the flip side, a fall below €12,800 will invalidate the Santa rally.
