DAX drifts lower

Less than 24 hours before tomorrow morning’s German flash manufacturing PMI report is due, the DAX has finally run out of steam.

The German benchmark index has been remarkably strong through 2013, and heading towards the close is up over 20% year-to-date, as well as showing a 28% rise in the last 52 weeks. The index now finds itself knocking on the door of its all-time highs. When you consider how intrinsically tied to the health of the other members of the European Union the DAX is, its performance is nothing short of a miracle. If we look for examples of where the US quantitative easing policy of injecting $85 billion on a monthly basis has gone, we need search no further than here.

No doubt the predominantly export-driven economy of Germany has benefited from the artificially low value of its currency, as it has been dragged lower by the balance of the other eurozone nations. Even so, it is hard to believe that the DAX has been able to blossom so fully, when you consider who it has as its most direct trading partners, let alone the nations on its borders.

Tomorrow morning’s German flash manufacturing PMI figures, released at 8.30am (London time), will go a long way towards clearing up how much of this value is optimism and how much is proven.

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