Dax Index
The DAX index is little changed today as traders reflected on the gains made in the second quarter. The index is trading at €12,322 at 07:10 GMT, with most companies being in the green. The blue-chip German index gained by more than 16% in the second quarter, with Deutsche Bank being the best-performer. Elsewhere in Europe, the CAC 40 is down by 0.20% while the FTSE 100 is down by 0.05%.
Investors are possibly thinking about the upcoming regulations as German regulators remain in focus following the Wirecard implosion. As you probably know, Wirecard was once a leading company in the DAX index valued at more than €24 billion. The company’s downfall started less than one year ago as the Financial Times started to write about its accounting issues. As a result, it went out of business last week as EY announced that it could not locate about $2 billion in its balance sheet.
The challenge for DAX index companies is that German regulators are now under pressure to implement sweeping regulatory changes. These changes could be at the detriment of companies in the index.
Worse, the situation is made worse by the challenges facing Bayer, a leading company in the DAX index. Many people have pointed fingers to BaFin, the German financial regulator for accepting this transaction. This is because Bayer has been forced to pay billions of dollars to litigants who sued Monsanto because of is Roundup. Indeed, a banker told the Financial Times that:
“BaFin isn’t in the same league as the Financial Conduct Authority, which impressed me when I was in London.”
Meanwhile, investors are being optimistic about stimulus as Angela Merkel becomes EU’s president. The prime minister, known for being a conservative, has recently become a leading proponent of the $846 billion recovery fund being promoted by the European Commission.
Therefore, as I wrote yesterday, analysts believe that the respected premier will be able to convince the “frugal four” to accept the deal. This deal will be of benefit to the DAX index because its companies are among the biggest in Europe.
At the same time, investors are still watching the ongoing development in Hong Kong. Some protests have emerged there after Hong Kong published the national security law, which is stricter than what most people were expecting.
BMW is the best-performer in the DAX index today. It is up by more than 1.68%. It is followed by Deutsche Post, Bayer, Linde, and Covestro, which are up by less than a percentage point. On the other hand, Continental, Allianz, Deutsche Bank, and RWE are the worst performers in the index today.
The DAX index is trading at 12,396. On the daily chart, it is above the 50-day and 100-day exponential moving averages and above the 61.8% Fibonacci retracement level. Also, the index is still along the island reversal area that I have written about before. This means that there is still indecision among bulls and bears in the market.
As such, the outlook is neutral but the key levels to watch are the resistance at 12,622 and the support at 11,946. A move above the resistance will see the index continue to rise while a move below the support will imply that bears have been vindicated.