DAX Experiences Decline Amid Rising Inflation and SAP Setbacks
- Inflation in Germany reaches 2.2% YoY for November
- SAP shares decline following Oracle's disappointing performance
- DAX remains near its historical peak
The DAX index, alongside other European markets, is trending downward as traders react to lower-than-expected Chinese trade figures and assess local inflation rates along with SAP's stock performance.
Shares of SAP are facing pressure following insights derived from Oracle's results. Oracle reported Q2 revenues that fell short of expectations, resulting in a slight downturn in its share price during after-hours trading on Monday. Despite this, SAP has observed a remarkable 72% increase year-to-date, although it is currently lagging within the DAX early in the trading session.
In terms of German inflation data, the confirmed rate for November stands at 2.2%, aligning with earlier estimates and representing a marginal increase from October's 2%. The core inflation rate has risen to 3% in November, compared to 2.9% in the preceding month.
This data release comes in anticipation of US inflation statistics to be announced tomorrow, ahead of the upcoming European Central Bank (ECB) interest rate decision on Thursday. Analysts expect a rate cut of 25 basis points and are speculating about additional cuts due to the declining economic sentiment across the region.
Amidst this challenging economic backdrop and persistent political volatility, the DAX has soared to record heights, buoyed by positive sentiments regarding potential ECB rate reductions.
DAX Outlook – Technical Analysis
Following a breakout from its bull flag formation, the DAX surged to an all-time high of 20,474. Currently, it has pulled back slightly to approximately 20,300, alleviating some overbought conditions as reflected by the RSI.
Traders will be observing for further upward movement beyond 20,474, targeting 21,000 and new record highs.
Support is limited until the psychological marker of 20,000, with the October high at 19,670 also serving as a crucial level. A drop below this point would invalidate the near-term bullish trend.
FTSE Declines Following Disappointing Trade Data from China
- Mining stocks drop as Chinese imports fall by 3.9% YoY
- Tesco shares rise as the supermarket gains market share
- FTSE tests resistance at the upper channel limit of 8325
The FTSE index has opened lower, largely driven by declines in mining stocks following lackluster trade data from China. Recent figures indicate that while exports rose 6.7% year-on-year to $312.3 billion, this was a significant decrease from October's 12.7% growth, falling short of the expected 8.5% increase.
On the import side, results were even less encouraging, with a 3.9% drop, marking the steepest decline since September 2023 and deviating from expected growth of 0.3%.
The data reflects a cooling demand for Chinese exports as companies begin to diversify their supply chains amid potential trade tariff uncertainties from the new US administration. Additionally, the declining import figures suggest weakening domestic consumption in China, despite ongoing stimulus efforts.
In contrast, Tesco is experiencing a positive trajectory, with a reported 5.2% increase in sales over the 12 weeks ending December 1, increasing its market share to 28.1%, the highest it has been since December 2017.
Furthermore, recent data indicates grocery inflation has risen to 2.6% in the four weeks to December 1, up from 2.3% in the previous period.
UK supermarket chains have issued warnings about potential inflationary pressures, specifically due to impending tax increases from the new administration coupled with a rise in the minimum wage.
FTSE Outlook – Technical Analysis
The FTSE index has remained within a range since May, facing resistance around 8325 and support near 8150. It is currently testing the upper band of this range, and a successful breakout could lead to targets of 8400 and 8480, potentially reaching new highs.
Conversely, any failure to break above 8325 decisively may trigger a drop toward support at the 50-day moving average around 8245 and the lower band at 8150.
