DAX took the Trump’s hit

31 January, 2017

Global Stocks slid Monday after President Donald Trump restricted immigration from seven Muslim-majority nations, a move that underscored the administration’s proposals to erect barriers to foreign trade. That has also taken its toll on the DAX index that ended yesterday’s session more than 1% lower.

The president’s quick action, while in keeping with his campaign rhetoric, nevertheless took many investors by surprise and deepened unease and uncertainty about the U.S.’s economic landscape in the Trump era. The biggest hit was observed on the US indices, but the European stocks were also affected. The DAX moved in tandem with other European indices and failed to defend from losses.

However, the index rebounded a bit after weaker inflation print from Germany. Although Germany’s inflation rate hit its highest level since mid-2013 during January, it was lower than expected. On the other hand, we have observed improvement in business confidence. The pickup in business confidence was led by industry, with the measure for that sector rising to 0.8 from zero in December, its highest level since June 2011. Services confidence also firmed, although retailers and construction companies were less upbeat.

Deutsche Bank contributed to DAX gains. The index was slightly higher on Tuesday morning. source: Bloomberg

Looking at the chart we may notice that the index has re-tested previously broken resistance at 11650 that is also close to an upper bound of the long-term upward channel. A rebound from here is expected as the base-case scenario remains bullish. However, if bulls lacks the fuel to push the index higher the focus should turn to 11400. If the level is broken, a bearish short-term trend may start. 

The DAX is still prone to rise further, although it lacks momentum for now. source: xStation 5

Company news: Deutsche Bank was fined $629 million by U.K. and U.S. authorities for compliance failures that saw the bank help wealthy Russians move about 10 billion dollars out of the country using transactions that were likely thinly veiled attempts to cover up financial crime. Shares jumped after the news as the company is making progress towards resolving the investigations.

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