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Morning Brief: DAX Index Retreats as Dow Jones and Nikkei 225 Rises

S&P 500
S&P 500

US stocks ended slightly higher as investors reacted to relatively strong new home sales data. The Dow Jones, S&P 500, and Nasdaq 100 indices rose by 0.20%, 0.30%, and 0.40%, respectively. The gains yesterday were mostly because of technology companies like Microsoft, Apple, and Tesla, which all rose by more than 1%. Still, the indices remain deeply in the red this month, with the S&P 500 a few points below its correction zone.

Why Dow Jones and other US equities have fallen

There are several factors behind the recent moves in the Dow Jones and other indices. First, there are election-related risks in the United States. With the number of people voting by mail rising, there is a potential of contested results. Second, the dollar has been relatively strong in recent weeks. Indeed, the dollar index has risen by more than 2% this month.

Third, the price of crude oil has also been in a sharp downward trend. Weak crude oil prices tend to have a negative impact on the overall prices. Fourth, investor sentiment has soured, with a recent survey by the American Association of Individual Investors showing that 46% of them expect stocks to drop.

Finally, the Dow Jones has dropped because of the lack of a new stimulus in the US. With the political season in high-gear, there is a high likelihood that Washington will not reach a deal.

Nikkei 225 rises while Hang Seng falls

Elsewhere, Asian equities were mixed today. In Hong Kong, the Hang Seng index is down by 0.40% while in mainland China, the Shanghai composite has dropped by 0.25%. On the other hand, in Japan, Australia, and New Zealand, the Nikkei 225, ASX 200, and DJ New Zealand are up by more than 0.50%.

The price action in Asia is mostly because investors are digesting several news. For example, in China, equities are falling even as more investor inflows are expected in the country. That is after FTSE Russel announced that it would add the country’s sovereign debt into the World Government Bond Index in 2021. This is a major deal that is expected to open up $16 billion trillion to foreign investors.

DAX index futures fall as FTSE 100, CAC 40, and Stoxx 50 rise

In Europe, we have a mixed picture in stocks. In Germany, the blue-chip DAX index has fallen by 0.10% while the FTSE 100, CAC 40, and Stoxx 50 are up by more than 0.30%. The gains in European indices is likely a response to the performance of US equities.

Dow Jones futures technical outlook

The Dow Jones index is up slightly in the futures market. It is trading at $26,899, which is slightly above yesterday’s low of $26,537. On the daily chart, the price is attempting to retest the important 78.6% Fibonacci retracement level.

Also, it is below the 20-day and 10-day exponential moving average and below the neckline of the head and shoulders pattern. Therefore, even with the recent two-day gains, the trend remains weak, which means that the price is likely to resume the downward trend.

Dow Jones Daily Chart

Dow Jones