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- Breaking the Ice in DAX Paves the Way For a New Depth
Breaking the Ice in DAX Paves the Way For a New Depth
The latest inflation data from Germany showed a decline in the average price of goods sold by manufacturers of 14.7% YoY. It is the lowest on record since the beginning of 1949. This may be attributed both to lower cost of electricity and the lack of demand due to slender consumer wallets, pushing down wholesale pricing for durable goods. The latter version looks more likely as Germany's manufacturing activity in terms of PMI (purchasing managers index) plunged below 40 points, the lowest since the pandemic spring of 2020, holding this current anti-record since July.
This data reinforced my thoughts to hold short positions on the Xetra DAX (GER40) index futures. This week, it finally passed its previous technical support area around 15,000. Last Christmas' area of price adjustments below 14,000 is the next possible target, yet probably not limited to. A price discount from summer peaks in Germany's DAX already exceeded 10%, compared to 7.3% for the S&P 500 major barometer of Wall Street. Europe's industrial engine demise led to increasing sell-off even in its blue chip assets, with negative impact of the Middle East violence breakout and China's recovery halt. The European economy is more exposed to this regrettable development than America, which is separated from the epicentre of geopolitical tensions and the flow of migrants.
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