DAX
The DAX index is up by more than 1.30% as traders remain optimistic about the global economy. The index is also waiting for the ECB interest rate decision and Eurgroup meeting this week. Most importantly, the index is waiting for corporate earnings from the United States. The DAX index is not alone. Other indices in Europe are also rising, with the FTSE 100 and CAC 40 climbing by 1.40% and 1.24% respectively.
The world capital markets tend to be interconnected. It is this reason that global stocks crashed during the dot com bubble and in March this year. Indices have also recovered in unison in the past few months. Also, investors can gauge the performance of companies in one country by comparing the performance of their foreign competitors.
Therefore, part of the reason why the DAX index is gaining today is because of the upcoming earnings season. As I wrote on Friday, we are now in one of the busiest weeks in corporate world as American and some European firms will report their quarterly earnings. In the US, companies like Wells Fargo, Goldman Sachs, Morgan Stanley, Pepsi, and JP Morgan will release their earnings. These numbers will give us an indication of how companies performed in one of the toughest quarters in history.
The DAX index is also gaining ahead of the ECB monetary policy meeting that will start on Wednesday. Analysts expect that the bank will leave interest rate unchanged and maintain its guidance on quantitative easing. Therefore, barring any substantial announcement, I expect that the bank’s decision will not have a major implication on the DAX. However, a meeting by EU leaders on Friday could move the index if the members agree on a 850 billion euro common recovery fund.
All companies in the DAX index are in the green today. The biggest mover is Wirecard, whose shares are up by 7.47%. It is followed by Continental, the tyre manufacturer whose shares are up by 3.53%. Heidelbergcement, MTU Aero, Lufthansa, and BASF are among the other top movers. On the other hand, Fresenius, Vonovia, RWE, and Muench are among the laggards.
The DAX index is trading at 12,800 and is up for two straight days. The price is above the 50-day and 100-day EMAs and is slightly below 12,932, which is the highest point since June. The DAX is also above the ascending trend line that is shown in pink. Therefore, a move above 12,932 will signal that bulls have prevailed, which will see the price continue rallying. It will then target the next resistance at 13,200.
On the flip side, a move below 12,000 will usher in a new bearish trend. This price is not only psychologically-important support but also the lowest level on June 29 and the intersection of the ascending trend line.