DAX index analysis: German stocks are facing major headwinds

August 30, 2023 12:00 AM PDT | By Invezz

DAX index analysis: German stocks are facing major headwinds — Image source: Invezz

Germany concerns continues

The DAX index has moved sideways in the past few months as concerns about the German economy continues. Recent economic numbers have shown that the biggest economy in Europe is struggling, with analysts expecting it to have the slowest recovery in the developed countries.

German companies are battling several challenges. First, there is an ongoing labor shortage, which has pushed wages up at the fastest pace on record. Data published on Tuesday showed that wages jumped by 6.6% in the second quarter.

Second, companies are also batling the rising cost of doing business. While inflation has dropped from its pandemic high, firms are still struggling and seeing smaller margins. Most recently, natural gas prices have surged because of potential strikes in Australia.

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Further, like in other countries, companies in Germany are fighting the elevated interest rates, which have affected liquidity in the region. Data published on Monday showed that money supply in Europe tumbled to the lowest level in years.

It is against this backdrop that the German coalition government announced a new 7 billion corporate tax relief to support companies in the country. The plan, known as the Growth Opportunities Law, will run for four years.

While many companies have welcomed the move, some analysts believe that the tax cuts did not go further enough.

Most DAX constiuents were in the red in August. Some of the top performers in the index were Munich Re, Allianz, Brenntag, Fresenius, and SAP. On the other hand, the main laggards in the index were Infineon, Siemens Energy, Siemens Healthineers, Siemens AG, Zalando, and BMW.

DAX index forecast

The daily chart shows that the DAX 40 index has been in a tight range in the past few months. It has remained between the key support at €15,464 and the resistance at €16,433. The index was consolidating at the 25-day and 50-day exponential moving averages (EMA).

The Average True Range (ATR) has moved sideways and is nearing the lowest level in years. Therefore, the shares will likely remain in this range in the near term as investors. The key support and resistance levels to watch will be at €15,465 and €16,433, respectively.

The post DAX index analysis: German stocks are facing major headwinds appeared first on Invezz.

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