DAX index weakened last week, but it continues to trade above 15,000 points

Written by: Stanko Iliev
May 1, 2021
  • The GDP for the first quarter in Germany fell by 1.7%
  • The euro area's quarterly gross domestic product fell 0.6% in the first quarter
  • The pace of recovery is still behind the desired levels

The German DAX weakened last week as investors remain concerned after data showed the eurozone entered into a second technical recession in the first quarter of the year. The euro area’s quarterly gross domestic product fell 0.6% in the first quarter following a 0.7% drop in the prior quarter.

In the European Union, gross domestic product edged down 0.4% in the first quarter following a 0.5% drop in the fourth quarter of 2020. The eurozone’s annual inflation rate for April should be around 1.6% which is in line with expectations.

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The unemployment rate in the eurozone stands at 8.1% (data for March 2021), the policymakers believe that the worst has been avoided, and all industry sectors should benefit from the economic recovery. The GDP for the first quarter in Germany fell by 1.7%, hit by renewed lockdowns, and economic sentiment contracted as another coronavirus wave weighed on local businesses.

“While Germany was a positive growth driver for the entire eurozone economy at the end of last year, it has now turned into a drag factor,” said Carsten Brzeski, an analyst from ING.

German data was quite worrisome, the German economy contracted by a greater-than-expected and the number of unemployed people increased by 9K. The pace of recovery is still behind the desired levels, and on Monday, Germany will publish retail sales numbers for March.

An analyst from Unicredit said that data on German GDP is weak but nearing the inflection point, while Barclays expects a rebound for the German economy in Q3 2021. The third wave of coronavirus still represents an issue; shops, cafes, restaurants are closed, and the battle against the coronavirus continues.

The European Central Bank left monetary policy unchanged at its latest meeting and once again reported that it will continue with fiscal stimulus until the economy fully recovers. The ECB’s President Christine Lagarde said that the EU economy is still suffering while the degree of ECB’s concern about the economic situation will significantly influence stock markets in the near term.

Technical analysis: DAX index continues to trade above 15,000 support

Data source: tradingview.com

DAX index weakened last week, but it continues to trade above the 15,000 support level. Further turmoils should not be discounted, and if the price falls below 15,000 points, the next target could be around 14,500 or even 14,000.

According to technical analysis, 14,000 points represent a powerful support level, and as long the price is above this support, there is no indication of the positive trend reversal.

Summary

The German DAX weakened last week as investors remain concerned after weaker than expected economic data for Germany and the eurozone. Eurozone entered into a second technical recession while the GDP for the first quarter in Germany fell by 1.7%.