IBEX 35, DAX 30 Forecasts: Bears Take Control As COVID-19 Fights Back

Key Talking Points:

  • Brexit and COVID-19 remain at the forefront of market concerns
  • IAG falls more than 11% and drags the IBEX 35 lower
  • DAX 30 reverses last week’s gains and corrects overbought conditions

Risk-off To Start The Week As COVID-19 Fights Back

A new strain of COVID-19 detected in the UK has forced many countries to stop flights to and from the country, meaning airlines are taking a big hit this morning. Brexit is also on everyone’s minds, as we see increased calls for talks to be postponed past the Dec 31st deadline given the health crisis unfolding, which will only drag on uncertainty for longer.

As many parts in the UK are placed into tier 4 restrictions, many countries in mainland Europe are also struggling to keep a lid on the spread of COVID-19, with Germany reporting its highest number of daily deaths last week. This has increased concern and caution amongst investors, and given that equity markets were already pushing the overbought limit, it is not surprising that stock indices are taking a hit this morning.

IBEX 35 Slides As Airline Stocks Take A Hit

At the head of this risk-off move is the Spanish stock index, as the IBEX 35 is down 2.95% at the time of writing. We must remember that the tourism industry, which is taking a bit hit on the back of worsening COVID-19 conditions, is a big part of the index. The biggest losers of the day so far are IAG, the airline conglomerate that owns Iberia and British Airways (IAG), which is down 11.25%, followed by Melia Hotels International SA (SMIZF), down 6.5% so far.

From a technical standpoint, the IBEX has given in a big part of last month’s merits by falling below the 8,000 mark, a highly important psychological area that had halted any attempt at a bullish run throughout the summer. The current price is hovering just above the 50-day simple moving average, so we may expect to see further losses throughout the day, as the next support area is likely to be around the 7,640 horizontal line.

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