DAX index

DAX Index Crawls Higher as Morgan Stanley Sees a 10% Bounce

The DAX index is up slightly today as investors react to corporate earnings from European companies like Peugeot owner, PSA, LVMH, and Montclair among others. They are also reacting to a positive earnings update from Deutsche Bank, the troubled German lender. Further, investors are reacting to a bullish call by Morgan Stanley, which expects that European stocks will rise by 10% because of the recently-passed recovery fund.

Elsewhere in Europe, the FTSE 100 is up by 0.30% while the CAC 40 is relatively lower.

Morgan Stanley Expects European Stocks to Rise

The DAX index rose partly because of a note analysts at Morgan Stanley sent to their clients. In the note, the bank said that European stocks could rise by 10% because of the recently-passed recovery fund. The bank said:

“We see scope for a further 10% outperformance from EMU [European monetary union] equities versus global peers, led by Peripheral indices (15% outperformance).”

While the bank did not name the DAX index in the note, analysts believe that it will be a key beneficiary as one of the biggest indices in Europe. The index is down by more than 4% this year while the Dow Jones is down by more than 8%.

Deutsche Bank stock jumps

The DAX index is also in the green partly because of Deutsche Bank, the biggest lender in Germany. In a statement today, the bank said that it will report earnings that are slightly above consensus estimates tomorrow. Analysts polled by Reuters expect the bank to report a net loss of more than $155 million, which will be better than the 3.2 billion euros made last year.

The bank’s core equity tier one (CET1) ratio was at 13.1%, which was higher than the previous estimate at 12.4%. Still, analysts are worried about the bank’s forward guidance. Deutsche Bank share price is up by 0.95%.

Meanwhile, investors are also reacting to earnings from PSA, the owner of Peugeot. The numbers showed that its operating income was 517 million euros, double what analysts were expecting. The firm also reiterated its outlook for an average operating margin of more than 4.5%. PSA share price rose by 4%. Meanwhile, automobile companies in the DAX index were mixed, with BMW shares rising by 0.53% while Daimler declined by 0.23%.

DAX index technical outlook

The DAX index is trading at €12,881, which is a few points below last week’s high of €13,301. On the daily chart, the price is slightly above the 50-day and 100-day exponential moving averages. It is also slightly above the 78.2% Fibonacci retracement.

Also, the price is inches above the ascending trend line that is shown in pink. Therefore, the index is likely to continue moving higher as bulls target the next resistance level at €13,300.

On the other hand, a move below the ascending trend line will invalidate this trend because it will signal that bears are in total control.

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