Dax Follows Global Markets Higher. Can it last?

Fiona Cincotta March 26, 2019 2:30 PM

Equity indices across the board are charging higher as rebounding US Treasury yields lift sentiment.

At the end of last week, grim German factory data and the Fed doubling down on dovish rhetoric rekindled concerns over global economic growth. US treasury yields inverted, giving to talk about recession, sending investors into panic mode.

Today US treasury yields are recovering, calming nerves, allowing a bounce in stocks as the recent selloff looks overdone.

Dax shrugs off weak data
 Whilst German manufacturing has been hit hard by slowing global demand, today we saw German consumer confidence unexpectedly declined heading towards April. This is particularly poignant as domestic demand will need to drive the German economy this year as exporters struggle with the slowing global economy, Brexit and the ongoing trade tensions.  

The move lower in consumer confidence should only be short lived, as high employment and strong wage growth should ensure consumers continue to spend well. However, this is on the assumption that uncertainty caused by Brexit and the ongoing US - Sino trade dispute doesn’t pick up further.

Proxy for global growth
The Dax is a proxy for global demand. Whilst global growth concerns remain front and central to what is directing the markets, we can expect the Dax to underperform. When fears over global growth ease, the Dax is just as capable of outperforming.

Whilst the Dax is up 0.7% at the time of writing, there is a chance this is more of a dead cut bounce rather than anything more significant. We would be looking for a move above 11475 to break the trendline on the 15 minute chart and indicate a more positive bias. On the downside strong support can be seen at 11300.
. 


TAGS:
Germany 30
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.