DAX Lags As German Economy Growth Halts

The DAX 30 index is Germany’s response to the United States’ Dow 30. The index is made up of the biggest companies in Germany. The companies are chosen in such a way that they represent how the economy is doing. The biggest company in the DAX index is SAP, which is valued at more than €129 billion. This pales to the Dow, whose biggest company is Apple, which has a market cap of more than $810 billion. Other key companies in the index are Siemens, Allianz, Daimler, and Linde. The chart below shows the performance of DAX and Dow in the past one year.

As shown, the DAX has underperformed the Dow by a large margin. While the Dow has gained by 7%, the DAX has declined by more than 10%. The reason for this is that the German economy is not doing well. Data released this week showed that the economy had stagnated. This is in comparison to the US economy that has continued to grow boosted by the stimulus by the Trump administration.

Another reason why the index has not performed well is that the German government has been increasingly conservative. This is the main reason why it has managed to have huge surpluses. While surpluses might seem good, they come at a price of low investments.

Investors in Germany have also been concerned about the Trump administration. The American government has threatened imposing tariffs on cars from Germany. If this comes to pass, it will mean a lot because of the scale of the German auto industry.

In addition, the auto industry has been under pressure especially after the Volkswagen emission scandal. This scandal has led to stricter emission standards that have affected the automobile industry. The three biggest German automobile manufacturers – VW, BMW, and Daimler – are in the index. The recent rally was fueled by hopes that the US will soon make a deal with China.

The index has risen from a low of €10,276 in December and reached a YTD high of €11,377. However, the growth YTD has also lagged behind that of the Dow. On the yearly chart, this price is slightly above the 21-day and 42-day EMA. The price’s RSI has also moved lower and has recently reached a low of 50. In the coming days, there is a possibility that the index will reach the December lows of below €11,000.

1 2
View single page >> |

Disclaimer: The information found on forex.info are intended only to be educational, is not advice nor a recommendation and thus should not be treated as such. We strongly recommend that you ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.