DAX index surges amid shocking revelations about Wirecard

Dax Index
Dax Index

The DAX index and other European indices are in a roll today. The blue-chip German index is up by more than 1.90% and is trading at €12,767. The DAX is not alone. Other European bourses like CAC 40, FTSE 100, and Stoxx 50 are up by 2%, 2.10%, and 2.16% respectively. By gaining, European stocks are joining their counterparts in Asia like the Nikkei 225 and Hang Seng.

Commerzbank shakeup

There are two big news today in Germany. First, Commerzbank announced that its CEO and Chairman were resigning, in the biggest corporate shake up in Germany in modern times. The shake up came after Cerberus Capital Management, called for restructuring in the second-biggest banking group in Germany. In a statement, the CEO, Martin Zielke, took responsibility for the underperformance of the bank, whose share price has dropped by half during his tenure. He will possibly be replaced by Roland Boekhout, an insider who heads the bank’s corporate clients.

Commerzbank share price is up by more than 7% today.

Wirecard new revelations

The DAX index is also reacting to new recent developments in the fallen Wirecard. According to the Financial Times, the company’s core business in Europe and United States have been lossmaking for years. This casts a doubt about the company’s businesses that have not been affected directly by its accounting scandal.

Data from the auditor shows that between 2016 and 2018, the company had operating margins of about 22% and EBITDA of 439 million euros. However, a closer scrutiny of these numbers show that these profits existed only on paper. Instead, the company was deeply in the red during this period.

Wirecard share price is down by more than 11%. That is because investors believe that the Europe and American businesses will fetch a lower price than earlier anticipated.

Top movers in the DAX index

Most companies in the DAX index are in the green today, with Continental being the best-performer. Its share price is up by more than 4.5%. It is followed by Volkswagen, Daimler, Deutsche Bank, and BMW. These shares have jumped by more than 3%.

Other than Wirecard, the other worst-performers in the DAX index are Vonovia, Lufthansa, Beiersdorf, and Merck among others. Even these shares are up by more than 1%.

DAX index technical analysis

The DAX index is trading at 12,793 and are in the third straight day of gains. The price is above the 50-day and 100-day exponential moving averages and slightly above the 78.6% Fibonacci retracement level. It is also inches below the highest point in June at 12,921.

Therefore, the index will likely continue rising as bulls attempt to retest this high. However, a move below 11,928 will invalidate this trend. This price is at the intersection of the ascending trend line shown in black and the lowest point on June 30.

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DAX index forecast

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