DAX to 11540 as global recession fears return

The Dax is trading sharply lower across the morning session as fears over the health of the global economy returned to haunt traders. The relief rally inspired by the Trump administration delaying tariffs on some Chinese imports was short lived – blink and you missed it!

Data showing that the German economy contracted in the second quarter reignited fears of a global recession, dampening demand for riskier assets such as equities. Europe’s largest economy shrank -0.1% after growth of 0.6% in the first quarter. The dramatic slowing of the German economy shows the extent to which the US – Sino trade war and weak demand has negatively impacted the German manufacturing sector.

German GDP data comes following a slew of weak readings from China overnight. Chinese industrial output showed the slowest level of growth in 17 years. Dismal data from Germany and China combined with bond markets flashing recession warning alarms through inverted yields (US 2 year and 10-year yields) has cut short Trump’s tariff delay inspired relief rally. The move by the Trump administration appears to be too little, too late as far as the markets are concerned. Data is showing that damage to the global economy owing to the ongoing trade dispute has already been done.

US retail sales to provide clues?
With little else due on the European or German economic calendars this week, investors will be watching trade headlines closely. Tomorrow’s US retail sales data could also provide clues as to the health of the US economy amid the dragged out US – Sino trade dispute. Signs of weakness could unnerve jittery traders further and pull the Dax lower.

Dax levels to watch:
The Dax is down 1.3% and is trading below its 50, 100 and 200 sma on 4 hour chart. The price is has broken through support at 11640. This has opened the door to support at 11540 prior to support at 11470. On the upside, a break back above 11640 could see the Dax advance to 11870.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.