DAX index
DAX index futures turned higher as investors reacted to strong results by Deutsche Bank. The index is up by 0.15%, outperforming other European indices like FTSE 100 and Stoxx 50, which are down by more than 0.40%.
Deutsche Bank share price will likely be the top mover in the DAX today as investors react to its strong numbers. The company said that its net profit increased to more than 182 million euros in the third quarter. That was a substantial improvement from the losses it made in the first and second quarter of this year. It had also made a net loss of 832 million euros in the same quarter in 2019.
The bank, which is a major DAX index constituent, recorded a 13% increase in revenue to more than 5.9 billion euros. This was mostly because the core banking operations rose by 9% while the investment banking revenue rose by 43%. Revenue in its asset management business rose by 4% as it recorded significant net inflows of more than 11 billion euros. It also recorded its 11th consecutive quarters of cost cuts.
Analysts were expecting Deutsche Bank to record strong earnings in Q3. That is because of the strength of its trading income and lower provisions for bad debt. Also, recent earnings from European banks like Barclays, HSBC, and UBS have been relatively strong. Most importantly, before the second wave of the virus, the German economy was in a strong upward trend.
Deutsche Bank share price has surged by 15% this year, becoming one of the best-performing stocks in the DAX index. It ended the day at 7.9 euros.
Another company to watch in the DAX index will be Merck, the pharmaceutical giant. The company recorded a substantial increase in its quarterly earnings yesterday. Keytruda, a cancer treatment drug rose by 21% to $3.1 billion. In total, it expects its adjusted profit to jump to between $5.91 and $6.01. That is better than the previous guidance of between $5.63 and $5.78.
Yesterday, I wrote that the DAX index was set to continue falling because of its head and shoulders pattern. That happened, as the index ended the day at 11,951. Today, the index has risen slightly in the futures market.
However, because of the H&S pattern, I believe that the increase is a dead cat bounce and that the index will continue falling as bears target the second support of the pivot points at 11,700. This price is also slightly above the 61.8% Fibonacci retracement. However, a move above 12,400 will invalidate this trend.
