DAX Index double punched by soaring Covid cases and Wirecard troubles

The DAX index is down by more than 0.70% as concerns about a second wave outbreak in Germany increases. Investors are also focusing on Wirecard, the troubled payment company. Its shares dropped by more than 45% today. The DAX is trading at €12,262 while Wirecard share price has fallen to €14.30.

More coronavirus cases emerge in Germany

Germany thought it had prevailed in its battle against coronavirus. It was wrong. According to the ministry of health, the number of cases has continued to rise for a third straight day. The worst-affected region is North-Westphalia, where more than 1,300 people were infected by the disease. All of them were working in a slaughterhouse. This number grew by 602 in the past 24 hours.

Rising cases in Germany is a major concern because of its importance in Europe. Also, it is a concern since most companies in the DAX index have now started to reopen their operations. More cases will likely lead to plant closures at a time when the country is trying to stimulate the economy.

Wirecard share price nosedive

Wirecard is the biggest “talk in town” as more people reflect on the growing scandal. In a statement yesterday, the company warned that the missing $2.1 billion of cash in its balance sheet does not exist. As a result, the company, which is now under a new CEO is considering restructuring. This is after it withdrew its fiscal 2019 results following revelations that these funds were missing.

The company is now in talks with lenders to restructure the existing debt. Among the measures it is considering are extending credit lines that are coming due at the end of the month. It has hired Houlihan Lokey to advice on the future.

What is clear is that Wirecard’s days in the DAX index are limited. This is because its market capitalization has dropped to just €3.19 billion, lower from a peak of more than €25 billion two years ago. Consider the statement a German professor made when it went public:

“We Germans aren’t as prone to euphoria as in the U.S., but back when Wirecard joined the DAX, there was this great feeling that we can also produce successful tech giants.”

DAX top movers

The biggest gainers in the DAX index were Continental, Linde, BMW, RWE, and Allianz. These shares rose by more than 0.60%. Apart from Wirecard share price, other big losers in the index are Deutsche Telekom, Lufthansa, SAP, Adidas, and Deutsche Bank.

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DAX Index technical outlook

The DAX index is trading at €12,309, which is within the range where it has been in the past five days. The price is still above the 61.8% retracement and the 100-day and 50-day exponential moving averages. It is also above the ascending red trendline. Therefore, the outlook for the index is neutral because it seems as if there is indecision among the bulls and bears.

Therefore, the levels to watch will be the lower end of the channel at €12,129 and the upper side at €12,507. A move below the former price will see it attempt to test the 50% retracement at €11,040. On the other hand, a move above the resistance at €12,515 will see it continue rising.

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