Market News & Analysis


Top Story

Dax Drop To Be Short Lived?

The Dax has dropped over 1% across the morning session, slipping back from Wednesday’s all-time high, as renewed concerns surrounding the coronavirus outbreak sweep across global markets. 

The latest reports from China show an additional 14,840 cases and 242 deaths confirmed, as China adjusts it diagnostic method. The new statistics have brought a fresh assault on risk appetite; a sharp contrast to yesterday’s optimism that the virus would peak this month. 

Recent macro data from Germany has been dismal, and that was before coronavirus struck. Industrial production plummeted -3.5% month on month in December, the largest decline since the financial crises. Factory orders dropped -2.1% showing that the slump in German manufacturing is in full swing. 

China car sales plummet
Reports that car sales in China fell to fresh lows in January as coronavirus kept buyers away from show rooms will only add to Germany’s woes. China is a key market for German auto manufacturers, fewer sales will be felt in an already challenged industry.
The European Commission has said that the coronavirus is a key downside risk and this could be magnified in exporter nation Germany which counts China as a principal trade partner.

German recession coming?
The German economy was already in a weak place owing to the US – China trade dispute inspired decline in manufacturing. Add into the picture concerns that coronavirus will also have a slowing impact and economists are starting to lower German GDP expectations. A German recession is not a distant possibility. Fourth quarter German GDP data is due for release on Friday.

Weaker Euro
With all the negatives there is a positive. The euro is hovering around the lowest level since 2017 amid growing speculation of ECB stimulus. Weakness in the common currency would offer support to exporter nation Germany.

Levels to watch:
After surging to a record high in the previous session, the Dax is off by 1%. Yet despite the pullback, the chart remains bullish for the Dax, even if the fundamentals aren’t so supportive.
The Dax trade above its 50, 100 and 200 sma on the 4-hour chart. Immediate support can be seen at today’s low of 13577, prior to Monday’s low of 13445. A meaningful break through this level could negate the current bullish trend.
On the upside, yesterday’s high and the fresh all time high of 13758.


From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.