The DAX index is down by more than 0.75% as traders wait for the upcoming interest rate decision by the ECB. Most companies in the index are in the red, with Infineon being the worst-performing. Its shares are down by more than 2%. However, the bright spot for the DAX is Deutsche Bank, whose share price is up by more than 1%.
While banks have been hurt by the low-interest rate environment, Deutsche Bank has gained because of its investment bank division. While the bank has been in trouble in recent years, no one ever doubts about the strength of its trading division.
For one, the division did extremely well in the first quarter. In the quarter, the company’s Fixed Income, Currencies, and Commodities (FICC) division rose by 13% even as the other division fell. And in an interview in May, the bank’s CEO confirmed that its traders had continued to execute well in the second quarter.
Therefore, investors believe that the bank’s provisions for bad debt will partially be offset by a strong investment bank earnings. This will be in line with what other American banks have done. Yesterday, Goldman Sachs said that its trading division rose by 93% in the quarter. JP Morgan’s FICC income also rose sharply.
Deutsche bank share price is trading at €8.9.
DAX index eyes ECB rates decision
The DAX index is also eying the ECB interest rate decision that is set for 11:45 (GMT) today. Analysts see the bank leaving everything unchanged partly because the EU economy has made some steady progress in the past few months. Therefore, as I mentioned earlier, I don’t expect that the decision will move the market as it did in June.
Another key driver for the DAX index is the upcoming recovery fund talks that will happen tomorrow. A breakthrough will be a positive thing for the DAX index because most of its constituent companies will help to rebuild the region.
DAX top movers
Apart from Deutsche Bank share price, other top performers in the DAX index are Daimler, BMW, Deutsche Wohnen, and Volkswagen. The automobile companies have jumped because of the impressive car registration numbers in June. On the other hand, the main laggards in the index are Infineon, MTU Aero, Siemens, Linde, SAP, and Bayer.
DAX Index technical outlook
The DAX index is trading at €12,828, which is inches below yesterday’s high of €12,932. This high was important because it was also the highest point in June. On the daily chart below, we see that the index is above the short and medium-term exponential moving averages.
It is also above the ascending trend line that is shown in black. As such, the index has been forming an ascending triangle pattern. Therefore, I expect the index to continue rising as bulls now aim for the next resistance at €13,200.
On the flip side, a move below €12,358 will invalidate this thesis. This price is at the intersection of the ascending trend line and the lowest point on July 10.