The DAX index has once again managed to wriggle itself from the tough situation that it found itself in as the index rebounded from the lows of the range and moved higher during the course of trading yesterday. This was in line with the general trend that was seen in the global markets yesterday and it remains to be seen how this move would pan out.
DAX Recovers
The markets around the world had crashed in the previous week on the back of the the action from the US to impose tariffs on Chinese goods. This unilateral action, followed by threats of more such actions to follow, pushed the Chinese to react and they imposed tariffs on some of the US goods as well and they too promised more actions. This led to fear and uncertainty that this would soon escalate into a global trade war with each side trying to protect its own markets.
It is clear that this is what the US is trying to do and at the end of the day, it is not good for any economy if they begin to give up globalisation and begin to follow a path of nationalization. This is likely to hit the countries very hard and it is this fear that had led to the fall. But we have seen the risk sentiment improving since the weekend as there has not been much follow up action since then and this led to a rebound in the DAX as it moved higher through the 11800 region and now trades comfortably above the 11900 region as of this writing.
But we believe that this rebound is more of a correction of the downtrend and it is likely that the risks are going to escalate in the short term once again. We are waiting for more clarity in the situation and once more clarity emerges in the short term, only then the investors and traders would be able to share their ideas and begin to regain confidence in the markets once again.