The DAX index has nosedived today as the market reacts to the rising number of Covid-19 cases from Germany. It is trading at €12,820, which is substantially lower than this week’s high of €13,200. It is also the worst-performing index in Europe today.
The number of Covid cases has jumped in recent days and health experts are warning that the worse is yet to come. The number of cases in the past 24 hours jumped to 6,638, which was a record figure. It was about 1,500 higher than those reported yesterday.
As a result, officials have started reimposing restrictions in key places like Berlin, the country’s biggest city. In total, Germany has recorded more than 341k infections and more than 9,710 deaths.
The impacts of these lockdowns and restrictions will be dire to companies in the DAX index. For example, some vehicle manufacturers like Daimler and Volkswagen could be forced to close some of their plants and stores at a time when vehicle sales are trying to rise.
Similarly, companies in the restaurants and pub industry are likely to suffer. For example, in the UK, where such restrictions have been placed Marston’s, a leading UK pub operator is slashing more than 2,150 employees.
All firms in the DAX are in the red today. However, automobiles like Volkswagen, BMW, and Daimler are the worst-performers as their shares have fallen by more than 2.8%. They are followed by BASF, Deutsche Telekom, and Siemens that are down by more than 2.5%. On the other hand, the best laggards are Bayer, Vonovia, and Beiersdorf.
All DAX constituents in the red
DAX index technical analysis
The hourly chart shows that the DAX index has dropped sharply today, and is at the lowest it has been since October 5. It has moved below the 15-day and 25-day moving averages. It is also significantly below the ascending pink trendline.
Therefore, the momentum seems to be lower, which means that the index will continue falling today. If it does, the next key level to watch is the €12,650 support.
Another scenario is where indecision comes back, forcing the index to form a bearish flag or bearish pennant pattern. Alternatively, a move above €12,900 will invalidate this trend.
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DAX technical chart
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