DAX index: auto giants fall as government holds off cash-for-clunkers

The DAX index three-day rally lost steam today as investors waited for the ECB interest rate decision. The index is down by almost 100 points and most constituent companies were in the red even after the coalition government agreed on a whopping €130 billion stimulus package.

German government launches stimulus package

The DAX index declined today even after the government agreed on a €130 billion stimulus package. The package includes a 3% decline in VAT from the previous 19% to 16%. This measure alone will cost the revenue authority more than €20 billion. Also, the new package includes a €300 bonus to all children.

The goal of the package is to stimulate consumer spending in a country that has been hit severely by the pandemic. Analysts expect the GDP to contract by more than 6.3% this year.

The package will also include generous rescue funds for most municipalities and companies. Just this week, the government agreed to a near €10 billion package for Lufthansa.

Auto giants fall because of cash-for-clunkers

Automakers were the worst-performing companies in the DAX index. Daimler shares declined by almost 4% while BMW and Volkswagen shares fell by more than 2%. Shares of Continental, which is an important automaker supplier fell by almost 3%. This is because the new rescue package will not include a “cash for clunkers” program, which the companies were lobbying for.

In the program, the government provided rebates worth about €2,500 for every car consumers bought. The goal was to incentivize them buy new carbon-emission-free cars.

Best and worst-performing stocks in the DAX index

Beiersdorf was the best-performing stock in the index today, gaining by more than 2.50%. The stock possibly rose because the government’s stimulus package will lead to more sales of its consumer products. Other best-performing stocks were Vonovia, Adidas, Deutsche Bourse, and Merck.

On the other hand, other than automakers, the worst performers were MTU Aero, Bayer, Lufthansa, Allianz, and Infineon.

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DAX Index technical outlook

The DAX index declined today as it approached the 78.2% Fibonacci retracement level at €12,572. On the daily chart, the price is above the 100-day and 50-day EMA. While the price may continue to rally, bulls must defend the 78.2% retracement first. As such, the bullish trend will remain so long as the index remains above this level.

On the flip side, a move below the psychological level of €12,000 will mean that there are more sellers in the market.

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