The DAX index is up by more than 1% today as traders react to the strong economic data from Germany and Europe. The index is trading at €12,675, which is substantially higher than this week’s low of €12,350.
All companies in the DAX index are in the green today after data from Markit showed that business activity was strong in Germany and the Eurozone in general. In Germany, the preliminary manufacturing PMI number rose from 56.4 in September to 58.0 in October. That was a better performance than the 55.1 that analysts were expecting. However, the composite PMI dropped to 54.5 from 54.7 in September because of the weak services sector.
In Europe, the manufacturing PMI rose from 53.7 to 54.4 while the composite PMI fell below 50 for the first time in several months. These numbers show that the German economy continued to bounce back in October.
However, the biggest risk is that the Covid-19 pandemic has returned to Germany. Just yesterday, the country confirmed more than 10,000 daily cases, the highest figure on record. It is not alone as other countries like Spain and Italy have reported rising number of cases.
The DAX index is also in upbeat tone today because of the strong earnings from Barclays. The UK bank delivered strong earnings, boosted by its trading division and strong mortgage uptake. Other European banks like UBS and Credit Suisse have also released strong numbers recently. This is a positive thing for Deutsche Bank, which is the second-best performing stocks in the index. This is because analysts now believe that the bank will also release better numbers.
MTU Aero is the best stock in the DAX today having gained 3.90%. It is followed by Deutsche Bank. Merck, Daimler, and Linde, whose shares have jumped by more than 1.70%. On the other hand, Delivery Hero, Deutsche Boerse, and Vonovia are the worst performers.
DAX index technical outlook
The daily chart below shows that the DAX index formed a hammer pattern yesterday. This pattern is usually a bullish sign. Today, the index is above the important support of €12,320. This support connects the lowest levels in July, September, and October. The index is also approaching the 25-day and 50-day EMA at €12,800. Therefore, I expect the index to continue rising as bulls attempt to test this resistance level. However, a drop below yesterday’s low of €12,320 will invalidate this trend.