The DAX index is the best-performing index in Europe today as investors cheered more stimulus from Germany. The index rose by more than 2.55%, led by Daimler and Lufthansa share price, which rose by more than 7.50%.
Automaker surge as government announces rescue package
Automakers were among the best performing companies in the DAX index. Daimler, Volkswagen, and BMW shares rose by more than 5% while those of Continental surged by more than 5%. These shares rose after the ministry of economics proposed a $6.2 billion stimulus package aimed at the automobile sector. The stimulus will mostly be targeted at electric vehicles.
This package comes at a time when global auto sales have plummeted due to the coronavirus pandemic. All manufacturers, including Nissan, Hyundai, and General Motors have reported double digit decline in sales.
At the same time, some activists are irked by the fact that some manufacturers like BMW have opted to spend money in dividends at a time when they are waiting for government support.
The funds to automakers are part of a $89 billion stimulus package that Germany is working on. This package will include additional funds for companies, debt relief to municipalities, and handouts to families.
Lufthansa share price surge as government agrees on bailout
Last week, we reported that the government had agreed to provide almost $10 billion in liquidity to save the company. We also reported that the company’s board had rejected the funds because of the terms.
Now, the government and the airline have reached an agreement that will see it as the company agreed to give up some slots in its main hub of Munich and Frankfurt. Still, the European Commission will need to vote for the deal that will see the government the biggest shareholder.
Lufthansa share price is trading at EUR 9.745 ahead of its first quarter earnings next week.
Other gainers and laggards in the DAX index
Other big winners in the DAX index were MTU Aero, the engine maker, Covestro, Deutsche Post, and Deutsche Bank. While there was no company in the red, the worst performers were RWE, E. ON, Henkel, and Vonovia.
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DAX Index technical outlook
The DAX index rose to an intraday high of €11,935, which is the highest it has been since March 5. On the daily chart, the index has successfully cleared the 61.8% Fibonacci retracement level and is still above the 100-day and 50-day exponential moving average. This means that bulls are in total control, which means that they will next aim for levels above €12,000.
On the other hand, a move below €11,572 will invalidate this trend because it will send a signal that there are still more sellers in the market. This price is along the 61.8% retracement level.