The DAX index declined slightly as investors started to worry about dividends. According to reports, companies like BMW, Volkswagen, and Continental, have talked about halting their dividends.
According to a report by the Financial Times, the three companies, together with Adidas had planned to pay dividends worth more than €7.5 billion. As they do these, these companies have slashed their employee hours and are relying on a government fund to pay them.
Therefore, with all this criticism, there is a likelihood that these companies, which belong to the prestigious DAX index, will not return funds to their shareholders. Worse, the two automakers and Continental, their supplier are among the worst-performing stocks in the index.
This news came two days after banks in the UK like Lloyds Bank and Barclays announced that they would not pay dividends following a request by their regulator.
For German companies like VW and BMW, another challenge is whether they will be able to thrive after the crisis is over. The companies are facing increased competition from Tesla and other Chinese manufacturers of electric vehicles. In addition, there is a question about whether demand for cars will come since it was dropping before the crisis.
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DAX Index Technical Analysis
Looking at the four-hour chart, we see that the DAX index has found significant resistance at around €10,117, which is around the 38.2% Fibonacci Retracement level. The index was also at the fourth phase of the Elliot Wave. I expect the index to continue moving lower as it attempts to complete the fifth phase of the Elliot Wave. This means that there is a likelihood that the index will retest its yearly low of €8,245.
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