- Summary:
- DAX index is soaring as Daimler, the maker of Mercedes Benz announces that it will reopen its plants later this month. Will auto demand follow?
The DAX index rallied today as tensions in the oil market appeared to cool-off. According to Bloomberg and Reuters, Russia has agreed to slash production by 1.6 million per day. Saudi Arabia is said to slash more than that.
Daimler Ready to Roll
The index also rallied because of Daimler, the maker of Mercedes Benz. In a statement, the company said that it will start to reopen on April 20th. Most of the company’s plants in Germany have been shut for weeks as the coronavirus pandemic has spread. The company will also continue to maintain shorter hours for its staff. Daimler stock rose by more than 3.8% in response to the news. Other auto companies like BMW and Volkswagen are expected to make similar moves.
The biggest concern for Daimler is whether there will be demand for its cars in the near term. With most economies being in a shutdown, it will be very difficult for the company to sell many cars. In fact, the auto sector was facing a slowdown before the crisis started. For example, 75 million cars were sold in 2019, down from 78.9 million in the previous year.
Another challenge German automakers are facing is that the industry is being disrupted. Companies like Tesla and BYD have continued to increase their market share.
Meanwhile, Angela Merkel has tightened rules for corporate takeovers. The bill, which was signed yesterday is aimed at preventing American hedge funds from acquiring German companies on the cheap.
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DAX Index Technical Analysis
The DAX index crossed the important resistance level of €10,136 yesterday. This resistance was along the 38.2% Fibonacci Retracement level on the four-hour chart. The Fibonacci was drawn by connecting the highest and the lowest points in March. Therefore, there is a likelihood that the index will attempt to test the 50% Fibonacci level at €10,885. This level is also an important resistance level as shown by the blue rectangle.