The DAX index managed to stay afloat during the course of the last week despite the global increase in risk and tension. While the markets had taken a hit in the week before last, due to the escalation of tension between the US and North Korea, it was the terrorist attack in Spain which had brought in a lot of confusion and uncertainty in the markets last week but the DAX managed to survive through all that.
DAX Manages to Survive
The index has been caught in a tight range over the past few weeks as the fundamental driver have been lacking. The economic data from Germany continues to remain strong but this has almost always been the case that the market nowadays assumes that it will be so anyway and so the reaction to any good data from Germany has been generally muted. It is the global factors and the geopolitical factors that seem to be dominating the DAX nowadays and we can see the index react to it. That is the reason why we are seeing the DAX under pressure and trading within a tight range over the last few weeks due to the increase in global risk and uncertainty.
The DAX had a quiet start to the week and following the attacks in Spain, it did fall hard and for a brief while, it threatened to break through the 12000 region and move much lower. But the weak data and signals from the Trump team helped the stock markets to recover across the world and this helped the DAX to recover as well. This is likely to be the case in the short term with consolidation continuing in the stock markets around the world.
Looking ahead to the coming week, we do not have any major economic news from Germany but we have the meeting in Jackson Hole where Draghi is expected to dwell a lot on monetary policy. While some expect him to spell out a change in policy, a large part of the market believes that he will stick to the usual. Expect some volatility in the DAX index surrounding this announcement and speech but we expect the 12350 to hold any upmove for now and we expect the DAX to be range bound heading into September.