- Summary:
- The DAX index is relatively calm as advisors to Xi Jinpng ask the country to abandon the first phase of the trade deal that was signed in January
The DAX index was little changed today as the market reflected on news from Germany and around the world. Among the most urgent was a sudden increase in coronavirus infections in important countries like Germany, China, and South Korea. There are also risks of a fresh wave of a trade war between the US and China.
Trade war risks rise
Most stocks in the DAX index are global companies that have operations around the world. For example, automobile companies like Volkswagen and BMW make most of their money internationally. Therefore, the index tends to do well when there is calmness and vibrancy in the market.
While trade war risks have calmed down, the reality is that the US and China are still contemplating their next move. In the past, Donald Trump has said that he will be happy to add tariffs on Chinese goods in response to the coronavirus pandemic.
In response, according to the Global Times, many influential people in China have started pressuring Xi Jinping to abandon the pact signed in January. These experts say that it is in the best interest of China to abandon this agreement. By so doing, they believe that they will punish the US at a time when it can ill afford another war. The paper said:
“It’s in fact in China’s interests to terminate the current phase one deal. It is beneficial to us. The US now cannot afford to restart the trade war with China if everything goes back to the starting point.”
The DAX index also wavered because of the rising number of coronavirus infections in the country after it started to ease restrictions. Most importantly, the index is reacting to the growing conflict between Germany and the European Union.
German stocks best and worst performers
The best performers in the DAX index were companies like Deutsche Post and E.ON, which rose by more than 2%. On the other hand, the worst performers were companies like Allianz, BMW, Siemens, and Vonovia.
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DAX Index technical outlook
The DAX index is trading at €10,800, which is slightly below the pink trendline shown below. The price is also slightly below the 50% Fibonacci retracement level and is above the 50-day and 100-day exponential moving averages. Still, with the index being in a long-term upward trend, there are chances that the index will continue rising as bulls attempt to retest the 50% retracement level at €11,000.
On the flip side, a move below €10,200 will invalidate this upward trend because it will send signals that there are still sellers in the market. This price is an important psychological level and an important support.