- DAX 40[1]:Rises as Gas Cuts Threaten to Shutter German Economy.
- FTSE 100[2]:Higher as Mining Stocks Lead the Way.
- DOW JONES[3]:Continues Rally as Sentiment Improves, Earnings Pick up Pace.
DAX 40: Rises as Gas Cuts Threaten to Shutter German Economy
The Dax[4]rose for a second day as investors scaled backfears of a looming recession. Investors are expecting the European Central Bank to increase rates by a quarter point when it meets on Thursday, marking its firstrate hike in more than a decade. All eyes are on Nord Stream 1 (NS1), the pipeline linking Russia directly to Europe via the Baltic Sea. Gazprom, Russia’s state-controlled gas giant, reduced NS1’s capacity by 60 percent in June, and last Monday shut it down completely for routine maintenance. In normal circumstances, this lasts just 10 days. But the fear in Berlin is that NS1 will not come back into operation as scheduled this Thursday.The potential shortage means “companies will either have to reduce their gas consumption or curb production”. Should flows cease completely, most economists expect the eurozone’s economic powerhouse to experience a severe fall in output. No gas this winter would, according to analysts at Swiss bank UBS, trigger a “deep recession” with almost 6 percent wiped off GDP by the end of next year.
DAX 40 Daily Chart – July 18, 2022
Source: IG
From a technical perspective, Friday saw a bullish engulfing daily candle that engulfed the previous two days of price. We did however close below the key psychological 13000 level and after a brief spike above it in European trade we are back below said level. We do need a daily candle close above the psychological level if we are to see higher prices, while fundamentals weigh heavy on the Eurozone
