Dax Rallies As Chinse Manufacturing PMI Overshadows German Issues
Fiona Cincotta December 2, 2019 11:48 AM
Dax rallies on Chinese data. Will it break out above 13300?
The Dax rebounded on Monday as traders focused on strong data from China which boosted risk sentiment and overshadowed data showing the German manufacturing sector remains deep in recession
The recovery in the Dax follows on from gains in Asia as investors cheered better than forecast Chinese manufacturing data. The Chinese Caixin / Markit manufacturing purchasing managers index rose to 51.8 in November up from 51.7, the fastest expansion since December 2016. The data eased fears surrounding the slowing of the world’s second largest economy amid the ongoing US – China trade dispute.
Regarding the ongoing trade talks, investors stuck with bets that the US and China would reach a trade deal sooner rather than later even after Beijing insisted that trade tariffs would need to be rolled back as party of the phase one trade deal.
German manufacturing pmi
German manufacturing pmi showed the sector remains stuck in recession. The pmi increased to 44.1 in November, up from 43.8 last month, where 50 separates expansion from contraction. It was the second lowest reading since June 2009. Delving deeper into the figures and some concerning trends remain. New orders fell for a 13th straight month and factories slashed jobs at the fastest pace in 10 years.
Data at the end of last month showed that the German economy avoided a recession in the third quarter and consumer confidence increased. However, inflation for Europe’s largest economy dropped and retail sales also declined. It feels premature to be calling the bottom of this slowdown. More data is needed to confirm whether that has been hit and the German economy is slowly turn a corner.
German politics surprise
Dax traders will be keeping a close eye on the political landscape in Germany after results of the SPD leadership contest surprised. The SPD voted in leaders from the left wing of the party, replacing more centrist candidates. The SPD are the junior coalition party. The change of leadership is now likely to result in a change of policy which Merkel’s CDU/CSU will struggle to accept. Traders will keep a close eye on developments.
Levels to watch:
Following a strong rally in October the Dax remains in consolidation mode, with few attempts to break out of the current range 13100 – 13300. The Dax remains above its 200, 100 and 50 sma a bullish sign. We would want to see daily close above 13300 or below 13100 as an indication of direction.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.