DAX Index Cautiously Higher as Bayer Share Price Tumbles
The DAX index is up by 0.40% as the index attempts to catch-up with its American counterparts. The index is trading at €12,800, which is still below this week’s high of €12,949. Other indices in Europe like the FTSE 100 and CAC 40 are also in the green.
The DAX index ended the third quarter in the green, having gained by about 4%. That was a relatively weaker performance compared to the Dow Jones and the S&P 500 that rose by more than 8%. Also, the index spent the quarter between a high of €13,457 and a low of €12,067.
Today, while most companies in the DAX are in the green, it has been dragged by Bayer, the giant chemicals company. Bayer share price is trading at €47.03, which is ~12% below where it ended the day yesterday.
This decline is mostly because of the restructuring the company is going through. Yesterday, the company announced that it was planning to cut billions of euros in costs through layoffs. The firm is focusing on the agricultural segment, which includes its Monsanto segment.
For starters, Bayer’s $63 billion acquisition of Monsanto has been one of the worst M&A deals in the world. Because of this deal, the firm has had to spend billions of dollars settling claims that Roundup triggered cancer.
In a statement yesterday, the company said that it will not be able to meet its 2021 sales and cash flow targets. It expects sales to be flat in 2020 and 2021. The new restructuring strategy comes in addition to another plan in which the firm expects to cut $2.6 billion of costs from 2022.
On the other hand, Infineon, Deutsche Telekom, and Daimler are the best-performing DAX index components today.
DAX index technical outlook
The daily chart shows that the DAX index tumbled on September 21, when it fell to a low of €12,500. Since then, the index declined to a low of €12,312 and then bounced back to the current €12,831. The price is now consolidating at the middle line of the Donchian channel.
Therefore, I suspect that the index will continue rising as bulls aim for the next resistance at the upper Donchian level at about €13,340. On the flip side, if bulls are unable to press ahead above the current resistance, it will increase the likelihood of the index falling back to €12,312.