11:30 September 12, 2023
With the calendar of macroeconomic releases exceptionally thin today – the German Index of Economic Sentiment (ZEW) is the only major release today – DE30 contracts could see higher volatility. According to Bloomberg analysis, gas demand in European industry remains very low and the chemical sector is bracing for a further collapse in demand. Investors are expecting an improvement in the ZEW index, which stands at -12.5 compared to -15 in July. However, given the weak macroeconomic data for August, there is potential for possible downside disappointment. In addition to the ZEW values themselves, which could increase or somewhat dampen recession fears, markets are waiting for the European Central Bank’s decision this week. Despite Christine Lagarde’s announcement, investors see a real chance that interest rates will remain unchanged given the ongoing weakness of the European economies and Germany itself.
Undoubtedly, not only the ZEW, but also tomorrow’s ECB decision could be a key point and catalyst for volatility, potentially affecting traders’ positioning and investor sentiment. With German industry already in very poor shape (PMI > 40 points) and ECB tightening gradually starting to impact demand (given the lagging effect of interest rates), the fear of a prolonged recession on the Old Continent seems real to be. The question investors are asking today is to what extent this recession risk is currently reflected in stock valuations. Since the beginning of the year, the DAX /DE30 has gained almost 12% and has recovered by more than 30% since the low point in autumn. However, very strong bidding became active above 16,000 points after the benchmark index hit record highs, and bears have gradually taken control since then.
On the technical side are the DAX (DE30) contracts are at an interesting point, “dangerously close” to the SMA200 average (red line), the 23.6 Fibonacci retracement of the fall 2022 bullish wave, this year’s March lows and the trend line – all four around 15,500 points . A fall below this level could open the way for bears to 15,000 points and the 38.2 2022 Fibonacci Retracement levels. A weaker-than-forecast ZEW index could reassure investors about the collapse of the German economy and dampen risk appetite ahead of the upcoming fall-winter season.
Source: xStation5 from XTB
SHARES with 0% commission*
Invest from as little as 10 euros
Invest in your favorite companies and ETFs for a fraction of their original price! Start building your diversified portfolio today!
Disclosure in accordance with Section 80 WpHG for the purpose of possible conflicts of interest
The author may be invested in the securities or underlying assets discussed.
The authors of the publications prepare this information at their own risk. Analyzes and opinions are not written with reference to the specific investment objectives and needs of any particular person. XTB publications commenting on specific situations in the financial markets and general statements made by XTB employees regarding the financial markets do not constitute, and cannot be construed as, advice to the customer by XTB. XTB is not liable for any losses that arise directly or indirectly as a result of decisions made in relation to the content of the publications.
Risk notice
CFDs are complex instruments and involve a high risk of losing money quickly because of the leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Investment success and profits from the past do not guarantee success in the future. Contents, newsletters and communications from XTB do not constitute investment advice. The communications are as Promotional communication to understand.