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DAX futures: German market set to bounce at the open

‘The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be.’

DAX set to open in the green

As of 4:48 am (GMT+1), IG Markets data suggests that the DAX will open ~2.7% or 234 points higher.

The above implies a hopeful bit of respite for German traders and investors, after the German benchmark dropped 187 points or 2.10% on Monday – closing out the session at the 8,741 point mark.

Fresenius, Deutsche Borse and Deutsche Post were the best performing equities on Monday; while MTU Aero Egines, Adidas and Bayer suffered heavy losses.

Looking at the DAX from a technical perspective, DailyFx analyst Justin McQueen recently noted that he is watching out ‘for a retest of the 2016 low situated at 8696, where failure to hold could see losses extend to 8350 (October 2014 low). Keep in mind that with volatility remaining elevated, the DAX will be subject to wild swings.’

Moreover and in response to the implied economic strain caused by the spread of Covid-19, Germany’s government yesterday approved an emergency aid package worth approximately a €750 billion.

Speaking of this move, Spiegel International wrote:

‘The government is making massive amounts of money available. After six years of taking on no new debt, the country's commitment to a balanced budget is being abandoned.’

All up, Germany’s aid package is sweeping in scope, aimed at helping freelancers and small business through subsidies; larger companies with credit guarantees and even potentially direct investments; other measures will be implemented to ensure tenants cannot be evicted due to coronavirus related financial stress; the welfare application process will be simplified; and hospitals will receive a €3 billion funding injection.

Other market moves in focus

Other key European markets such as the French CAC 40, the Swiss SMI and the Italian FTSE MIB also suffered steep losses on Monday. Swiss markets were the hardest hit out of those three indices, closing out the first session of the week 5.37% or 463 points lower.

Broader afield, Asian Pacific markets fared just as poorly: the ASX 200 fell (though rebounded today), the Hang Seng dropped over 1,000 points and China’s CSI 300 shed 122 points.

Bearish market activity has likely been compounded by a strained global economic outlook. Overnight, the International Monetary Fund’s (IMF) Managing Director, Kristalina Georgieva said:

‘The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be.’

The IMF’s base case is now a 2020 recession. One that will be at least as bad, or potentially worse than the recession(s) many countries experienced during the GFC.

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