Here’s why the DAX index is erasing yesterday’s gains today

It is a sea of red in Europe today as investors react to Dr. Anthony Fauci’s warning of a “disturbing surge” of coronavirus. In Germany, the DAX index is down by more than 0.75% with most companies in the index being in the red. In France, the CAC 40 index has fallen by 0.62%, while FTSE 100 is off by 0.82%. Meanwhile, Stoxx 40, which tracks the biggest firms in Europe has fallen by 0.60%.

Coronavirus risks rise

The DAX index rose yesterday as hopes of a global recovery outweighed those of a second wave. The hopes accelerated after Markit released the important manufacturing and services PMI numbers. The data showed that the European economy accelerated the growth made in May in June. This was a positive thing for the DAX index because most companies are in the services and manufacturing sector.

However, all these companies count the US as an important market. As such, a warning from Dr. Fauci seems to be raising concerns among investors. In the statement, he warned that community spreading was accelerating and that the next few weeks will be critical.

Perhaps, the biggest concern among investors in the DAX index is that the EU said that it would bar American flights after it reopens its borders. The bloc said that the United States has not managed the virus well. This has an impact in the DAX index and CAC 40 because it means that the important market will not be accessible.

DAX Index top movers

Only six companies in the DAX index are in the green today. The best performer is Wirecard, the giant payment processor that has made headlines this week. The shares have jumped by more than 8%. Other top movers are Continental, Infineon, Volkswagen, and Lufthansa. On the other hand, the worst performers in the DAX index are Henkel, Beiersdorf, SAP, Bayer, Deutsche Telecom, and Deutsche Boerse. These shares have fallen by more than 1%.

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DAX Index technical outlook

The DAX index is trading at €12,460, which is slightly below yesterday’s high of €12,613. On the daily chart, the price has moved above the island reversal pattern that we talked about yesterday. Still, even with the decline today, the price is still in an upward trend, as evidenced by the red ascending line. This means that the index will continue rising since it is also above the upper side of the island reversal at €12500.

On the other hand, a move below the €12176 will invalidate this prediction. This price is along the lower side of the island reversal pattern.

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