DAX index weakened last week due to concerns about the Delta variant

The German DAX weakened on a weekly basis as investors remain concerned that the global economy could be hit by the fast-spreading Delta variant of the coronavirus together with further new variants, especially ones that might not be stopped by existing vaccines. According to the World Health Organization, the spread has not yet run out of control in Europe; still, the future pandemic developments are uncertain, adding additional weight to financial markets.

The Delta variant accounts for nearly 98% of all new cases in Germany, and daily cases have more than doubled within a week. The Robert Koch Institute reported 8,324 more coronavirus cases on Wednesday, representing the highest daily number of infections in the last three months.

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“Many of the places around the world where Delta is surging, even in countries that at a national level have high levels of vaccination coverage, the Delta variant itself, is really circulating in areas of low level of vaccine coverage and in the context of very limited and inconsistent use of public health and social measures,” said WHO epidemiologist Maria Van Kerkhove.

Despite this, the DAX index continues to trade in a bull market, and as long the DAX is above 15,500 points, there is no risk of a positive trend reversal. Germany’s producer price index for industrial products soared 10.4% in July to 113.9 compared to the same period in 2020, and the country’s finance ministry said that strong domestic demand in Germany is predicted to drive significant growth in the third quarter, following a 1.5% increase in Q2 GDP.

Finance Minister Olaf Scholz said that the economic recovery lifted tax revenues, but accumulated tax revenues from January to July are still 1.7% lower compared to the same period in the pre-pandemic year of 2019. According to the German Economic Ministry, the outlook for the industry remains positive, while the German central bank expects that the German economy could grow 3.7% this year.

Another positive news is that the EU June Trade Balance posted a seasonally-adjusted surplus of €12.4 billion, but European policymakers reported that it would continue with “persistently accommodative” monetary policy as the pandemic casts a shadow over the economic comeback. The next week will start with the August preliminary estimates of Markit PMIs for the EU, while Germany will release its second-quarter GDP estimate.

Technical analysis: DAX index continues to trade above 15,500 support

DAX index weakened this trading week, but it continues to trade above the 15,500 support level. Further turmoils should not be discounted, and if the price falls below 15,500 points, the next target could be around 15,300 or even 15,000.

According to technical analysis, 15,500 points represent a strong support level, and as long the price is above this support, there is no indication of the positive trend reversal.

Summary

DAX index weakened last week due to concerns about the Delta variant; still, as long the DAX is above 15,500 points, there is no risk of a positive trend reversal. The country’s finance ministry said that strong domestic demand in Germany is predicted to drive significant growth in the third quarter following a 1.5% increase in Q2 GDP.

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