DAX Index surges higher as risk appetite sours

DAX Index is trading 4% higher today on improving risk appetite as the economies worldwide step up the reopening process. As expected, Germany is warning of a significant slowdown in the economic activity for the second quarter.

Fundamental analysis: Bundesbank expects the momentum to pick up

In its regular monthly report, Germany’s Bundesbank said that it expects the national economic activity in the second quarter to come in significantly below that of Q1 as there is still “a very high level of uncertainty about future economic developments”. Accordingly, the German economy contracted 4.6% in April.

The business activity is expected to pick up later in the second quarter (June).

The central bank also praised activities undertaken by the German authorities, after the Government introduced a 1.8 trillion EUR stimulus package. As a result, the bank has detected signs of economic recovery.

According to Bundesbank, some 6 million workers received state wage support during the month of April. The central expects the recovery in the construction sector to be more robust than the rest of the economy. 

Technical analysis: Dax Index surges higher

After printing the 1-month low near 10,150 on Friday, the Dax Index has screamed 4% higher today to trade just below the 11,000 mark. A daily close above 10,800 is likely to provide the buyers with a further impetus for the rest of the week. 

The next resistance is located at 11,300 in the context of a horizontal line that acted as an important support/resistance in the past. This level is likely to be the next target for the bulls this week. On the downside, the mini descending trend line near 10,800 will change its position and become support if the daily close above this level is secured today. 

Summary

The Dax Index has jumped 4% higher today on improving risk appetite as the economies ramp up with the reopening plans. Bundesbank said that the national economy contracted 4.6% in April, while it expects the economic activity to pick up in the late stages of the second quarter.