A sharp bounce on the DAX from the 10400 level in the last few sessions suggests that a corrective decline from the November highs is over and that this is now the first impulse as part of much higher prices.
It may be a quiet day in terms of economic data, but there’s been plenty of political news in mainland Europe which has affected both the euro and stocks. The big news is that Angela Merkel would be running for her fourth-term as German chancellor, while in France the centre-right Republican Party is close to choosing its presidential candidate after former leader Nicolas Sarkozy was knocked out of the race.
World stocks, the dollar and oil fell on Wednesday, while safe-haven assets such as gold and the Swiss franc rose as investors were rattled by signs the U.S. presidential race was tightening just days before the vote.
The jobs number came in light at 156,000. This benefits the incumbent party because the number wasn’t good enough to invoke interest rate hike fears. It wasn’t bad enough for the market to tank. But all the other factors are still out there, including Deutsche Bank and now the rhetoric concerning a conflict with Russia is heating up.
The German DAX has been trading south for the last year or so, but it might have been only a temporary decline if we consider that the structure is pointing up because of overlapping decline from 12424 to 8690 low, labeled as an A-B-C correction.
Financials markets may have found their black swan and it had nothing to do with Donald Trump, Hillary Clinton or any of the usual controversies we’ve speculated on over the months. No, the Germans may have their own Lehman moment coming just around the corner with Deutsche Bank. A zerohedge.com story says Merkel cannot politically afford to bail out the troubled bank.
European stock markets started this last day of the month and quarter sharply lower as concerns over Deutsche Bank intensified, which undermined sentiment in the financial sector once again. Deutsche shares tanked nearly 9% at the open and hit a new 33-year low. Investors were concerned by news that some hedge funds have begun to pull their business from Germany’s largest lender.