- DAX ends on a positive note, but ends the trading week with a lower of 4.09%.
- Wirecard collapses again due to the short sale.
- The German economy is experiencing the biggest drop in growth since the great financial crisis.
the DAX closed Friday on a positive note. However, on a weekly basis, the German benchmark lost losses. The most marked slowdown in growth since the great financial crisis had only a brief impact on share prices. Even the new skirmishes between the United States and China could not dampen the mood of investors for a long time.
The DAX closed Friday trading with a 1.24% gain at 10,465.17 points. On a weekly basis, the German stock barometer fell 4.09%. The MDAX increased by 1.20% to 23,270.68 points and the SDAX increased by 0.49% to 10,243.07 points. The technology-driven TecDAX increased 0.17%.
Wirecard collapses again
On the corporate side, the focus was again placed on Wirecard actions. The shares of the German payment service provider fell by 8.71%. They reached their lowest level since mid-September 2017 at 72.35 euros. According to a Reuters report, the German financial supervisory authority BaFin has no plans to ban the short selling of Wirecard shares.
Recently, hedge funds have shown a sharp increase in their interest in selling the stock. According to the Bundesanzeiger, around 10% of all Wirecard shares are currently sold short.
In late April, KPMG released a special report, which, however, was unable to dispel the remaining doubts about Wirecard’s business practices. As a result, short sellers have increased their positions and lowered the share price by more than 42% since April 28.
Among the DAX winners were shares in Volkswagen, Deutsche Post, Continental and RWE with a gain of 4.37 to 3.12%.
German economy experiencing the largest decline in growth since the great financial crisis caused by the coronavirus
Due to the corona crisis, the German economy contracted in the first quarter at a level unmatched since the major financial crisis. Gross domestic product decreased by 2.2% in the first three months of the current year compared to the previous quarter.
“This is the largest drop since the global financial and economic crisis of 2008/2009 and the second largest drop since German unification,” the Federal Statistical Office announced in a preliminary estimate on Friday.
Exports, consumption and investment were the areas where the strongest growth declines were recorded.
“The worst contraction in the German economy since 2009 is not the end of the current crisis. The second quarter will be more terrible,” commented ING chief economist Carsten Brzeski. “To be more precise, the incoming data will be worse, even if the worst may already be behind us,” he added.
Trade tensions push stock markets down
Fears of a further escalation of trade tensions between the United States and China have contributed to further liquidation of the stock markets this week.
US President Donald Trump has threatened to cancel the trade deal with China, saying he is “disappointed” with Beijing. In addition, the United States government has banned the United States chip makers from supplying the Chinese telecommunications giant Huawei.
If trade tensions escalate again into a trade war, there is a risk that the world economy will slide from a recession in the wake of the Corona crisis to a depression that would weigh on the equity markets in the long term.
On the other hand, central banks currently provide a sufficient volume of liquidity that investors will ultimately be forced to invest in stocks. This should continue to support the stock markets in the future.
“Monetary support and relatively attractive valuations will continue to support demand for risky assets, after the dust has dissipated after the coronavirus, we believe,” said Oliver Jones, senior market economist at Capital Economics, in a note.
Key technical levels of the German DAX 30
From a technical point of view, the situation in the DAX remains grim considering the recent losses. In order to initiate a major recovery movement, an increase above the 20-day moving average to 10,634 points is necessary. Subsequently, the 10,800 point mark may revert to the point. On the downside, a slide below the 50-day moving average at 10,216.90.90 should be avoided by all means, because otherwise a slide towards the psychologically important 10,000 mark is imminent.