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Friday’s Market Movers
The auto sector had a mixed end to the week. Continental AG declined by 1.43%, with BMW falling by 0.28%. Porsche and Volkswagen saw modest losses of 0.02% and 0.07%, respectively. Mercedes-Benz Group bucked the trend with a 0.01% gain.
However, bank stocks struggled. Commerzbank and Deutsche Bank fell by 0.56% and 0.30%, respectively.
Continental was among the worst performers, with investors locking in recent profits on restructuring news as demand fears lingered.
China and Central Banks Remain the Focal Points
We expect the DAX to take its cues from the Asian equity markets this morning. Fresh measures from Beijing drove demand for riskier assets. Beijing announced plans to cut stamp duty on stock trading. The latest move follows measures on Friday to bolster the housing market, including relaxing mortgage policies to shore up demand.
China Evergrande Group (HK333) resumed trading on the Hang Seng Index to test investor resolve. China’s economic troubles will also leave investors cautious ahead of key economic indicators from the US, Europe, and China. China Evergrande Group was down 78.5% in morning trading. However, investors brushed aside the slump on Beijing efforts to support the markets.
There are no economic indicators from Germany or the Eurozone to influence investor sentiment.
Later in the session, the Dallas Fed Manufacturing Index will unlikely affect sentiment. However, investors should monitor ECB and Fed commentary throughout the day. Hawkish central bank chatter would test buyer appetite amidst the rising expectations of a German recession.
The DAX Futures was up 87 points, signaling a bullish start to the European session.
DAX Technical Indicators
The DAX held above the 15,600 – 15,525 support band this morning. However, the DAX sat below the 50-day and 200-day EMAs, sending bearish near and longer-term price signals.
Looking at the 14-4H RSI, the RSI sits at 43.56, reflecting a bearish sentiment, with selling pressure overweighing buying pressure. Significantly, the RSI and the EMAs signal a retreat through the upper level of the 15,600 – 15,525 support band to target sub-15,000. A return to 15,700 would give the bulls a run at the 50-day EMA.
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