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.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.