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Dax Closes In On All Time High

Risk appetite has returned to the markets. German stocks advanced on Thursday as coronavirus fears eased, US data pointed to a strengthening US economy and China announced that it would slash tariffs on US imports by 50% in order to comply with the recently signed first phase trade deal.

Deutsche Bank hits 14 month high
Deutsche Bank shares surged 9% to a 14-month high in early trade after a major US asset manager brought up a chunk of the bank. LA based Capital Group, which has £1.3 trillion of client’s funds under management has built up a 3.1% stake just a day after Deutsche Bank reported full year results. This is a serious vote of confidence in the bank as it heads into a sweeping transformation process, which will see it focus on more traditional commercial banking as well as cut 18,000 jobs in a bid to halt the long-term share price decline.

Dismal factory orders ignored
Investors shrugged off disappointing German data which showed that the slump in manufacturing was far from over. Factory orders in Europe’s largest economy unexpectedly fell -2.1% month on month in December, well short of the -0.7% growth that was forecast. On a yearly basis new orders slid -8.7% against a 6% fall in November. Orders are considered a key gauge as that they indicate future output.

Whilst there have been tentative signs of the slump bottoming out, today’s data certainly doesn’t support that. The fact is there are still key risks to consider; China’s coronavirus disrupting global trade, Trump aiming tariffs on European imports and growing pressure to address climate change in business planning. 

Levels to watch
Traders weren’t prepared to let those concerns knock the Dax off its stride. The German index is up 0.6%. After breaking above its 50 sma yesterday, the bulls are in control and a fresh all-time high could be struck sooner rather than later.

Immediate resistance at 13606, today’s high, a breakthrough here could see the Dax test 13595 (high 24th Jan) before 13640 (all time high).
On the downside, today’s low of 13536 offers immediate support, prior to 13288 (50 sma) and on to 13131 (4th Feb low).


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