Germany’s DAX index weakened on a weekly basis, and much of the index’s losses can be attributed to the war between Russia and Ukraine.
Russia has shelled Europe’s largest nuclear plant, Zaporizhzhia, and the explosion there could be worse than that in Chernobyl.
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Vladimir Putin said that he aims to reach its goals and will continue despite many countries’ leaders calling him to put a halt to the war.
The Russian invasion of Ukraine is now on its tenth day, and many European countries are considering further toughening its sanctions.
European Commission President Ursula von der Leyen said that Russian assets in the EU would be frozen, while the latest round of sanctions also targets the Russian economy’s access to key technologies and markets.
The U.S. announced new sanctions on Russian banks, and the volatility of stock markets should remain high in the coming days as events in Ukraine dictate market moves.
European Central Bank affirmed its commitment to ensuring price and financial stability but also reported that the Russian-Ukrainian war is worsening inflation while creating new levels of uncertainty. This certainly complicates the outlook for how aggressively the European Central Bank would normalize monetary policy to fight inflation.
ECB members believe that inflation was likely to continue higher-than-predicted for longer, and as for the whole of Europe, rising inflation is a threat to the German economy.
Germany reported last week that the preliminary estimate of the February Consumer Price Index jumped to 5.1% YoY while the inflation in the EU for the same period reached a record high of 5.8%.
Raw materials and commodities prices also advanced to multi-year highs, which has a large weight in Germany. Michael Hewson, the chief market analyst at CMC Markets, added:
No one buys a new car when commodity prices are going through the roof and carmakers’ sales, and margins are going to be significantly lower. Consumer disposable income is going to take a significant hit because of higher food and gas prices.
The war between Ukraine and Russia continues to cause supply chain issues to many companies that look to find other sources for their parts.
The German economy is particularly vulnerable to shortages of key parts and raw materials, and many companies have already reported they had lost sales because of these problems.
Many big companies scaled back production of some of their most profitable models, and it is important to mention that Volkswagen announced that it would suspend its business in Russia.
13,000 represents a support level
DAX index weakened last trading week, but it continues to trade above the 13,000 support level.
Further turmoils should not be discounted, and if the price falls below 13,000 points, the next target could be around 12,500 or even 12,000.
Summary
The war between Ukraine and Russia continues to keep investors in a negative mood, and further turmoils for the Dax index should not be discounted. If the price falls below 13,000 points, the next target could be around 12,500 or even 12,000.
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