Market News & Analysis

Top Story

Continued Coronavirus Uncertainty Drags Dax Lower

Despite advancing on the open, the Dax was unable to maintain any positivity and dropped back into negative territory. Whilst today’s losses are minimal compared to yesterday’s 4% bloodbath, at 0.8% they are still significant.

Coronavirus fears still dominate with the number of cases in Italy increasing fast. At least 283 cases in Italy are confirmed and 5 deaths. Another 5 countries in Europe confirmed an increase in cases. Whilst the WHO aren’t declaring a pandemic, the broad sensation in the market is that we are on the cusp of one.

No end in sight
Whilst markets in Asia have been trending lower over recent weeks, US and Dax were trading at record highs just last week. Between yesterday and today traders are starting to price in a direct hit to the eurozone economy. Traders are no longer viewing this as solely an Asia issue and are attempting to gauge the impact that the virus outbreak could have economies is Europe. 

The problem is that it is very difficult to gauge the potential economic impact of coronavirus right now, given that it is impossible to tell whether this will be a prolonged outbreak pandemic or whether authorities will manage to contain it. The one thing markets hate is uncertainty, the inability to draw a line under an event or issue. So far, traders can’t draw that line so the uncertainty could continue to chip away at sentiment pulling stocks lower.

Levels to watch
The Dax is extending yesterday’s 4% selloff with additional losses of 0.8%. The Dax has fallen through its 50 & 100 sma on the daily chart with bears firmly in control.
It is currently testing support at 12878, the day’s low. A break through here will open the door to 12868 (low 31st Oct) prior to 200 sma at 12832. 
On the flipside resistance can be seen at 13132 (daily high) prior to 13400 (50 sma).

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.