DAX index rally has lost steam as focus shifts to ECB, Fed

July 18, 2023 02:40 PM AEST | By Invezz

DAX index rally has lost steam as focus shifts to ECB, Fed — Image source: Invezz

German stocks are losing momentum

The DAX 40 index started the year well as the outlook of the German economy improved. It jumped to a record high of €16,424 in June as most constituents jumped. This rally was broad-based, with most constituents being in the green.

Rheinmetall, a leading supplier in the defence industry, has become the best-performing company in the DAX index this year. It has jumped by over 40% as German works to boost its defence spending.

Adidas stock price has soared by over 35% as the company moves away from controversy. It recently ended its partnership with Kanye West which brought in over $1 billion in sales every year. Despite this, analysts expect that the company will achieve more organic sales this year.

Other top performers in the DAX 40 index are Heidelbergcement, Infineon, SAP, Covestro, Deutsche Post, and BMW among others. All these stocks have jumped by over 30% this year.

The top laggards in the index are Merck, Sartorium, Zalando, Vonovia, Siemens Energy, and Deutsche Bank.

Meanwhile, there are signs that investors are getting cautious about European stocks. According to the FT, investors are buying put options in European stocks. A put option provides some insurance against falling prices. In a note, an analyst at Bank of America said:

“People are uncomfortably long [Europe]. They’re long because they need to participate, but the fundamental conviction isn’t there. No one wants to chase this market so close to its high.”

The next key catalyst for the DAX index will come next week when the Fed and the European Central Bank (ECB) will deliver their rate decisions.

DAX index forecast

The German DAX rose to an all-time high of €16,424 in June. It has now been in a consolidation mode as investors start taking profits. The index has moved slightly above the 25-day and 50-day moving averages.

It has also moved above the ascending trendline that connects the lowest levels since December last year. Therefore, at this stage, the outlook for the index is neutral. More upside will be confirmed if the price moves above its record high.

The post DAX index rally has lost steam as focus shifts to ECB, Fed appeared first on Invezz.

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