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DAX futures drop following bullish session on Wednesday

Futures markets suggest the German DAX will open lower on Thursday, following a strong session across global equity markets overnight.

DAX futures in focus

Key European markets rallied firmly overnight – as the prospect of a potential Covid-19 vaccine looks to have sparked a new wave of investor optimism.

Specifically, the DAX rose an impressive 1.84% to finish the session at the 12,930 point level; the British FTSE 100 added 1.83%; the French CAC climbed 101 points; and the Italian FTSE MIB added 2.02% to close above the 20,000 point level.

Examining the German benchmark’s performance from a technical perspective – IG’s Chief Market Analyst, Chris Beauchamp, argued that the gains witnessed on Wednesday ‘are likely to continue unless a reversal below 12,400 develops. Further gains target 12,954 and then on to 13,600.’

On a more granular level, the best performing German stocks on Wednesday were MTU Aero Engines (+7.02%), Linde (+4.15%) and Merck (+3.79%); while the worst performing were Bayer, Continental, and Wirecard.

Wirecard continues to struggle

Wirecard (WDI) in particular has traded with pronounced volatility over the last month – with its market value plunging ~97% in that period after the company revealed that it could not locate some €1.9 billion in cash – representing approximately one quarter of the firm’s balance sheet.

Wirecard would soon declare that the ‘prevailing likelihood’ was that the cash never existed to begin with. In spite of this, investors continue to trade the stock – with WDI finishing out Wednesday’s session at €2.21 per share. For reference, in September 2018, Wirecard traded close to €200 per share.

Looking forward, as of 2:21AM (Berlin time), DAX futures were trading down 75.2 points or 0.58%, suggesting that the blue-chip German benchmark would open lower on Thursday, 16 July.

Elsewhere, US markets also traded strongly overnight, with the Dow Jones Industrial Average rising 227 points, the S&P 500 gained 29 points and the Nasdaq Composite added 61 points.

Despite this, US futures were also trading lower at the time of writing.

Catalysts in focus

Looking at the fundamental drivers behind global equity market’s bullish price action overnight, IG’s market analyst, Kyle Rodda argued that ‘Positive developments in the pursuit for a COVID-19 vaccine once again outweighed concerns about the worsening of the pandemic yesterday.’

Positive developments or not, cases of the virus continue to tick higher on a global scale, last standing at 13.67 million reported cases.

Regardless of these growing case counts, Mr Rodda went on to note that it appears that the ‘Threat posed by the virus and the risk of potential new lockdowns [is being] overlooked, as market sentiment found itself juiced by separate announcements from US biotech company Moderna, and the University of Oxford, that progress is being made in their respective efforts to develop a COVID-19 vaccine.’

The Moderna share price finished out the session up 6.90% at US$80.22 per share.

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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