DAX Index Falls As Lufthansa Airlines Axes Germanwings

Summary:
• DAX index fell as EU ministers failed to pass a Eurozone funding bill while Lufthansa announced that it would axe its Germanwings subsidiary

The DAX index ended its two-day rally as the market reacted to several data from Europe. The most significant was that European Union ministers had failed to reach a deal on coronavirus stimulus. The talks lasted for about 16 hours. In a statement, Mario Centeno said that they were close to a deal but were unable to close it.

The group of finance ministers were deliberating on a deal to create a big fund to help the region stabilize. There were talks of having the so called coronabonds, which would fall under the European Stability Mechanism. The talks broke down because some countries, like the Netherlands, wanted conditions attached to the new financing. This was rejected by countries like Italy and Spain that have been hit hard.

Hard-hit Lufthansa axes Germanwings

Lufthansa stock was among the best-performing stocks in the DAX index. This is even after the management announced new aggressive measures to stabilize the business. Some of these measures include decommissioning 40 jets. It also axed its loss-making Germanwings arm.

According to the Financial Times, the board is of the view that it will take years for the company to go back to its pre-coronavirus boom. This is a dire warning for the fifth largest airlines in the world. The company also launched measures to restructure its Austrian and Belgium airlines.

Lufthansa stock has dropped by almost 50% this year because coronavirus has halted many domestic and foreign travels. It is the second-worst stock in the DAX this year after MTA Aero.

Lufthansa is not the only airline to struggle. British Airways has suspended more than 30k employees and US airlines have received more than $50 billion in government funding.

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DAX Index Technical Analysis

The DAX index declined to €10,220, which is lower than yesterday’s high of €10,560. The price is along the 38.2% Fibonacci Retracement level. The Fibonacci is drawn by connecting the highest and lowest level in March.

This decline means that the index is struggling to reach the important 50% Fibonacci level. A bullish trend will likely remain as long as the index is able to sustain gains above the 38.2% Fibonacci level of €10,345.

On the flipside, this could be the start of a new bearish trend since bulls have failed to sustain levels above the 38.2% Fibonacci.