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DAX index at inflection point as Lufthansa share price drops

DAX Index
DAX Index

DAX index declined by more than 1 per cent as investors remained wary of the rising tensions between US and China. All companies in the DAX index were in the red today, with E. ON, the power generator being the worst-performing company. The index is trading at €11,639, which is close to its highest level in March.

Lufthansa share price drops

Lufthansa was the second-worst performing stock in the DAX index, dropping by more than 3 per cent. The stock declined after the advisory board refused to approve a €9 billion rescue package by the German government. In a statement, the company, which is burning about €1 million every hour, said that it will not call a shareholders meeting to approve the deal.

The reason for the current drama is that the European Commission has demanded for the company to give up some of its hubs. The commission has been under intense pressure from Ryanair, which disagreed on the bailout package. The smaller company wants Lufthansa to loosen its grip in Frankfurt and Munich.

In addition, the government will take a 20% stake in the company, which is the second-biggest airline in Europe. The government, which privatised the company in 1997, will reserve the option to increase its shareholding to about 25%.

Lufthansa share price is at €10.61.

E. On share price tumble

On was the biggest loser in the DAX index as its stock tumbled by almost six percent. This followed a statement by the CEO, who said that he did not see demand coming back this year. This will affect the company, which is also the biggest energy networks operator

E. On share price is currently at €9.50.

Automakers in the DAX index tumble

Automakers in the DAX index were also laggards. Shares of Volkswagen declined by 3.50% while those of Daimler and BMW fell by 2.95% and 2.60% respectively. Continental, the giant parts supplier also fell by more than 4%. This decline came a day after Nissan reported its worst loss in decades. It also came shortly after Renault, the French manufacturer, said that it would slash more than 8% of its workforce.

The best-performers in the DAX were Linde, Deutsche Telekom, Vonovia, and Infenion.

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DAX Index technical forecast

The DAX index is trading at €11,639, which is slightly below the weekly high of €11,808. On the daily chart, the price has moved back to the 61.8% Fibonacci retracement level a day after it formed a bearish candle pattern. The price is also slightly above the 50-day and 100-day exponential moving averages. Therefore, the index may continue falling, especially if bears push it below the 61.8% Fib. If it does this, bears will be aiming at the 100-day EMA of €11,320.

On the flip side, the bullish momentum will accelerate if bulls manage to move above this week’s high of €11,808.

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