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DAX hit by profit-taking

The German equity market is continuing its downward trend as the bulls take a breather.

Frankfurt business district
Source: Bloomberg

The Germany 30 is trading at 9855, down 0.2% on the day, after a quiet morning with little corporate and economic news from Germany. Without additional reasons to buy, traders are starting to take their money off the table.

Tomorrow, Germany will release its latest inflation figures, and analysts are expecting an increase of 0.2%. This announcement will give us an indication of what the European Central Bank will do at next Thursday’s meeting. I don’t foresee another interest rate cut in the near future, but if Mario Draghi hints at additional easing in the third or fourth quarter we could head back to towards the 10,000 mark.

If the DAX can hold above the 50-day moving average of 9811, it may stem the selloff. As Chris Beauchamp stated, the 9765 mark is providing support. In the short term the risk is to the downside, but signs of deflation could send the index towards 9940.

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