DAX Index Price Forecast – DAX to Continue Bearish Movement on Cues from Emerging Market Crisis & Sino-U.S Trade War

Germany equities were lower at the close on Wednesday, as losses in the Software, Technology and Telecoms sectors propelled shares lower. At the close in Frankfurt, the DAX lost 1.39% to hit a new 3-month low, while the MDAX index fell 1.12%, and the TecDAX index lost 2.48%. Declining stocks outnumbered rising ones by 552 to 156 and 68 ended unchanged on the Frankfurt Stock Exchange. The DAX volatility index, which measures the implied volatility of DAX options, was up 5.88% to 18.46. While EURO got a positive boost owing to favorable updates on Italian budget plans and Brexit proceedings, global equity markets have been painting red on emerging market currency crisis. Both US Wall Street and key equity markets across Europe closed negative on Wednesday. Asian shares fell for a sixth straight session on Thursday as oil skidded and safe-haven gold edged up, with investor confidence shaken by turmoil in emerging markets and jitters over a potentially severe escalation in the U.S.-China trade war.

Emerging Market Currency Crisis Was Influenced by Fed Rate Hikes & Trade War Woes

Investors are focused on the Sino-U.S. trade war with a public consultation period on the Trump administration’s intent to impose tariffs on an additional $200 billion of Chinese goods ending on Today. All major Asian markets such as Japan, Hong Kong, Shanghai, India and Singapore are trading down more than 0.35% on the day and are expected to close with significant decrease in value providing dovish cues to European markets. The ongoing currency crisis in emerging markets has not only affected Turkish Lira and Argentinian peso but also Indonesian rupiah, Australian Dollar and Chinese renminbi. The major reason for the currency crisis in ongoing market is believed by many analysts to be result of two factors – the collateral damage from US President Donald Trump’s absurdly irresponsible trade wars against all major global markets such as Europe, China and Canada and growing USD on multiple Fed rate hikes which caused global investors to chase yield in dollar investments rather than emerging markets on prospect of higher gains.

What is scary about this impending new currency crisis is that it could also precipitate a debt crisis, especially in Asian and other emerging markets and particularly in the corporate sector. Dollar or other foreign currency-denominated debt becomes harder to service in terms of local currency earnings once those currencies start to slide. German DAX futures trading in international market ahead of European market hours was down by 0.40%, indicating German DAX index would open dovish and continue to move downtrend across the day. Other major European indices such as EURO STOXX 50 and CAC 40 are also expected to trade downtrend during today’s market hours.