DAX Fundamental Analysis – week of December 5, 2016

The DAX index closed lower for the week as the stock markets continued to be nervy ahead of the Fed meeting scheduled for the middle of the month. The index did break through the lower part of the range when it broke through 10600 and once it broke through there, it was set to move to 10400 and we had mentioned the same in our forecasts as well. The index did move to the 10400 region where it was met with a lot of buying. It still looked weak and was looking towards 10200 and further below but the NFP report seems to have saved it for now.

The NFP report showed strong numbers in terms of pure employment but the average wages showed a very bad dip which showed that the quality of jobs being created did not contribute much to the US economy. This was bad for the USD but good for the stock markets as it meant that the economy of the US isnt as strong as the numbers show and this would mean that further rate hikes from the US would not be as frequent as the market expects. This would mean that funds would continue to remain in the stock markets for that much longer and hence the index moved back through 10500 and sits above that figure to close the week.

Looking ahead to this week, we have the ECB rates and the corresponding press conference where the market expects the ECB to give a guidance on the timelines of the QE program that is underway. The program is supposed to end in March and it remains to be seen whether it will end in March or whether it will be tapered or whether it will continue and this has to be determined by the ECB. The markets will be looking towards the meeting and hoping that the QE gets tapered and eventually turned off which will show that the economy of the euro region is strong and able to sustain when the tap is turned off.