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DAX set for a soft open, European markets remain in focus

We examine the German benchmark’s recent performance, what’s driven that performance, and where futures suggest the DAX will open on Thursday.

DAX Source: Bloomberg

European markets choppy following 750 billion deal

The German benchmark came off slightly on Wednesday, even as US markets rallied, with the DAX dipping 0.51%, or 67 points, to finish out the session at the 13,104 point level.

On a more granular level, the best performing German equities were BASF, Fresenius, and Deutsche Borse; while the worst performing were Bayer, Merck and Continental.

Mind you, over the last five sessions the DAX has risen strongly, up close to 2%, following news on Tuesday that leaders from the European Union had approved a €750 billion coronavirus stimulus package, aimed at helping countries recover from the Covid-19 pandemic.

The deal, which has been in the works since May – will be made up of €390 billion of grants and €360 billion in loans.

European markets rallied modestly on Tuesday off the back of that news, with the German DAX rising 0.99%, the Italian FTSE MIB gaining 0.49%, while the French CAC eked out a gain of 0.22%.

DAX futures in focus

Speaking of these market moves, IG market analyst Kyle Rodda today said:

‘A high degree of focus remains on European markets currently, as traders continue to digest the implications of the EU’s new recovery fund. European stocks faded overnight, in what was a relatively light session in the continent’s markets.’

Elsewhere, Mr Rodda noted that ‘A rallying Euro appears to be creating a small headwind for European equities in the short-term.’

The euro (EUR/USD) has indeed rallied strongly over the last five days, up from 1.14 to 1.16 in that period. In the last three months the key European currency pair is up 6.91%.

At the time of writing, DAX futures were trading up 0.21% or 28 points, suggesting that the blue-chip German benchmark would open higher on Thursday, 23 July.

US markets rise, Tesla steals the show

Though European markets have proven choppy over the last few sessions, US markets, in particular the tech-heavy Nasdaq Composite, continue to rally strongly, even as US coronavirus cases continue to grow at an alarming rate.

On Wednesday, the Dow Jones Industrial Average gained 0.62%, the S&P 500 index rose 0.57% while the Nasdaq added 0.24%.

Large-cap and often controversial automaker Tesla saw its share price bid higher on Wednesday after releasing its second quarter (Q2) results to the market. Here, Tesla reported total revenues of US$6,036 million, against total gross profits of US$1,267 million, on a GAAP gross margin of 21.0%.

Tesla was up 4.06% in after-hours trade on Wednesday.

At the time of writing US futures were all trading up.

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