The DAX has struggled mightily over the last six months, with investors seeing an 18% slide over that time period.
The worst of the worst happened during the month of August when Germany’s index dropped 12.2% over the course of two weeks. Since then it has struggled to make any meaningful gains, especially since any minor gains are counteracted by dips.
This behavior has caused analysts to wonder whether the DAX has yet to hit the bottom.
The concern is warranted, especially because the German DAX’s U.S. counterpart, the S&P 500, has done a much better job at recuperating from corrections. Over the last six months, for example, the S&P 500 is down only 4.21%. And while it also saw a quick slide in August, down 11.2%, it’s up 6.5% since that time.
The DAX, on the other hand, fell below its lowest August level last Friday. Of course, it’s seen a 2.6% gain since that time, but there’s no way of knowing whether this is a sign that it’s getting back on its feet, or if it’s just another quick hit, only to be followed by reality.
What’s most amazing about this turn of events is that the DAX was looking at an all- time high in April of this year. On the back of a burgeoning German economy, the index sped from a 52-week low of 8,354.97 last October all the way to 12,390.80 in April of this year, a blistering 48% gain in just six months. With the index now knocking on the underside of 10,000, it’s uncertain which way it will go.
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Data not helping
There’s more reason for the DAX to stumble as of Tuesday, as it was reported that German factory orders were down 1.8% in August. Following a 1.4% decline in July and a 0.5% growth forecast for August, this isn’t good news for the recovery of the Eurozone’s largest economy. It’s a sign that Germany is vulnerable to weak economic growth in emerging markets.
“While order data in August were overall disappointing, it’s too early to fall into a panic about the economy because orders from within the country and the currency union amid all the volatility still point upward,” said Stefan Kipar, an economist at Bayerische Landesbank in Munich. “However, high uncertainty about China and the cooling of the Chinese economy has left its mark.”
According to Bloomberg, however, there’s certainly room for caution. Only Euro-area orders were up in August, at around 2.5%, whereas domestic orders (-2.5%) and Non-Eurozone orders (-3.75%) were hit hard. Not only does Germany need to worry about China, but also its own country.
That’s not all, though. The recent Volkswagen scandal will likely cost more losses in factory orders in the future, making it difficult to predict what the economy will do.
The DAX isn’t out of the woods yet. While it’s currently seeing a nice bump, negative factory data and continued weakness in China and other emerging markets will continue to put a squeeze on exports. Has it hit the bottom? That’s also uncertain.
For now, it’s on hold.