Dax Drops As Fears Of Coronavirus' Economic Impact Grow

Fiona Cincotta January 30, 2020 11:48 AM

Dax drops over 1% on coronavirus fears

In line with other equity markets across the globe, the Dax is declining in early trade. Fears over coronavirus and its impact on the Chinese economy, global growth and trade have weighed heavily on sentiment.

The number of cases of coronavirus in mainland China has outnumbered the infections in China during SARS in 2002/3. At that time Chinese GDP was at 11% and the economic impact of SARS knocked 2% off the GDP in the relevant quarters.

Evidence is mounting that the deadly virus outbreak is disrupting China’s economy. Economists have started slashing growth figures from 0.3% - 4% as authorities start restricting travel and lock down cities. Chinese New Year is usually a time of huge spending on travel, entertainment, dinning out and shopping. Many companies have suspended their operations and the Chinese will not be spending anywhere near the $145 billion that was spent around the last Chinese New Year.

China is responsible for 15% of global GDP. When China sneezes the rest of the world catches a cold. As we have seen with US – China trade dispute, declining global confidence and trade has the potential to hit exporter nation Germany hard.

German data
Data coming out of Europe’s largest economy this morning hasn’t helped ease the run on German stocks. Germany’s unadjusted employment rate rose in January, 198,000 higher than the previous month and 20,000 higher than a year earlier.
Investors will now look ahead to German inflation data. CPI is expected to decrease -0.6% mom in Jan. US GDP figures could also help drive sentiment. US economic growth is expected at 2.1%#

Chart thoughts
Dax has dropped over 1% breaking through its 200 sma on 4 hour chart. The Dax trades below 200, 100 and 50 sma on a bearish chart.
Immediate support at 13106 (low 8th Jan) prior to 12948 (low 6th Jan). On the flip side resistance is around 13350, (100 sma swing high 29th Jan), followed by 13430 (50sma) which could open the door to 13604 (high 24th January).

TAGS:

Germany 30

Build your confidence risk free

OPEN A DEMO ACCOUNT

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

StoneX Financial Ltd (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.