DAX - a volatile start of the week

6 February, 2017

The DAX started the week with a fall of 100 points that was quickly corrected. Currently the index a bit higher on the day and the first drop should be associeted with the political news.

The first wave of selling came after Federica Mogherini’s speech on the situation on Ukraine. Let us recall that in 2014 the Russian invasion on Ukraine led to a nervousness on global markets. Today, EU foreign-policy chief said that the situation in Ukraine has deteriorated significantly in the last days. That means that the topic may be back on the table in upcoming weeks and may have an impact on global markets.

Another hit came from the Italian banks. Stocks from this sectore fell across the board. Investors also prepare for a busy week of corporate earnings and sift through the differing policy ambitions of U.S. President Donald Trump.

On the data fron, German engineering orders were down 15% on y/y basis. However, the union VDMA is putting a positive spin on it by saying the falls were to be expected given the global political uncertainties i.e. potential US trade issues. The US accounts for around 10% of German engineering export market. Earlier today a better report on factory orders was published (+5.2% m/m vs. 0.7% expected).

DAX rose after 2 hours of trading despite a sharp drop at the start of the session. source: Bloomberg

Later today we will hear from Mario Draghi, who will appear in the European Parliament. His speeach will be followed by a question-and-answer session. 

Looking at the chart we may notice that the index failed to break below the upper bound of the upward channel that was broken at the end of 2016. That means that a move lower should be limited. Unless 11400 holds, the medium-term scenario remains bullish.

DAX remains above the broken channel, more gains should follow. source: xStation 5

Company news: German steel conglomerate ThyssenKrupp has invested around €35 million into a new production unit for automotive springs and stabilisers in Hungary, the company said on Friday

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