It was a bearish Wednesday for the DAX, which fell by 1.36%. After sliding by 1.26% Tuesday, the DAX ended the day at 16,020. Significantly, the DAX visited sub-16,000 for the first time since July 17.
News of Fitch Ratings downgrading the US sovereign rating from AAA to AA+ weighed on riskier assets. The disappointing manufacturing PMIs from China, Europe, and the US continued to resonate mid-week, fueling recessionary jitters.
Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spreads from 0.0 pips with a commission charge of USD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Later in the European session, US labor market numbers provided brief support, with the latest round of US labor market stats easing fears of softer labor market conditions. However, it was a bearish US session, with the markets responding to the Fitch Ratings news.
The Dow fell by 0.98%. On Wednesday, the NASDAQ Composite Index and the S&P 500 saw losses of 2.17% and 1.38%, respectively.
Economic Indicators Sent Bearish Signals
It was a quieter day on the European economic calendar, with unemployment figures from Spain in focus. The numbers failed to distract investors from the Tuesday manufacturing PMI numbers and the bearish Asian session.
Unemployment fell by 11.0k in July versus a 50.3k slide in June. Economists forecast a 38.2k decline.
However, US labor market numbers provided brief support later in the day. According to the ADP, nonfarm employment increased by 324k in July versus a 455k surge in June. Economists forecast a more modest 189k increase.
The Market Movers
It was another mixed session for the auto sector. Porsche slid by 1.27%, with Continental AG and Volkswagen seeing losses of 0.98% and 0.78%, respectively. BMW and Mercedes-Benz Group bucked the trend, rising by 0.36% and 0.18%, respectively.
However, it was a bearish session for the banks. Commerzbank and Deutsche Bank fell by 1.71% and 2.30%, respectively.
Siemens Healthineers led the way down, sliding by 5.55% on disappointing results from the Varian radiation oncology business. The loss came despite the firm reporting a pickup in net profit in the third quarter.
The Day Ahead for the DAX
This morning, service sector PMI numbers from China set the tone. The Caixin Services PMI rose from 53.9 to 54.1 in July. Economists forecast a PMI of 52.5.
After bearish manufacturing sector PMIs from Tuesday, the European private sector will be in focus for a second time this week. Service sector PMIs from Spain and Italy and finalized numbers for France, Germany, and the Eurozone will move the dial.
Weaker service sector activity across Italy and Spain and a downward revision to the Eurozone services PMI would fuel recessionary jitters. According to the flash survey, the Eurozone services PMI fell from 52.0 to 51.1 in July.
German trade data is also on the calendar but will likely play second fiddle to the services PMI.
ECB Executive Board Member Fabio Panetta is on the calendar to speak today. However, investors should monitor the news wires for chatter with the media.
Eying the US economic calendar, US initial jobless claims and the all-important ISM Non-Manufacturing PMI are in focus. Economists forecast the ISM Non-Manufacturing PMI to fall from 53.9 to 53.0. However, investors must consider the sub-components. These include employment, new business, and prices.
Other stats include finalized Markit survey-based service PMI, nonfarm productivity, unit labor costs, and factory orders. However, these stats should play second fiddle to the initial jobless claims and ISM survey-based numbers.
DAX Technical Indicators
Looking at the EMAs and the 4-hourly chart, the EMAs sent mixed signals. The DAX sat below the 50-day EMA (16,173) while holding above the 200-day EMA (15,966), sending bearish near-term but bullish longer-term price signals.
Significantly, the 50-day EMA narrowed to the 200-day EMA, sending bearish price signals and supporting a fall through the lower level of the 16,080 – 16,000 support band to bring the 200-day EMA (15,966) into play.
A DAX move through the upper level of the 16,080 – 16,000 support band would give the bulls a run at the 50-day EMA (16,173).
The 14-4H RSI sits at 34.26, signaling bearish sentiment, with selling pressure overweighing buying pressure. Significantly, the RSI suggests a fall through the lower level of the 16,080 – 16,000 support band to target the 200-day EMA (15,966).
Chat now!
Add a Comment