- German Order Books Continue to Shrink.
- Port Congestion at Bremerhaven and Hamburg Intensified this Week Adding to Supply Chain Woes.
- European Energy Trading Risks Grinding to a Halt Unless Governments Extend Liquidity to Cover Margin Calls of at Least USD1.5 trillion.
DAX 40: Trades Higher with Gains Capped by Recession Fears as Wall Street Returns
The DAX traded higher in European trade with gains of about 180-odd points. European markets started the week on the back foot after Russia closed one of its main gas supply pipelines to Germany, sparking fears of severe energy shortages in Europe during the approaching winter. Markets have found some liquidity today after yesterday’s attempted upside move ran out of steam with the US Labor Day holiday.
At the beginning of the year, German industrial order books were richly filled but we have seen a steady decline in monthly industrial orders since February. In July, German industrial orders dropped by 1.1% month-on-month, from -0.3% MoM in June whileYoY orders were down by almost 14%. July numbers were a bit strong largely owing to major orders but domestic new orders, as well as orders from other eurozone countries, were down significantly which does not bode well for Europe’s largest economy. Supply chain worries continue to persist with more than 2% of all global shipping capacity at a standstill outside Germany’s North Sea port. Congestion continued to climb in September at Bremerhaven and Hamburg, where there are now 19 container vessels waiting to unload, up from 17 two weeks ago, according to the latest Kiel Trade Indicator. About 11% of all shipped goods are stuck, the report said. These supply chain pressures will only add to ongoing inflation and rate hike concerns.
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European energy trading risks grinding to a halt unless governments extend liquidity to cover margin calls of at least USD1.5 trillion, according to Norwegian energy company Equinor ASA. The biggest energy crisis in decades is eating up capital to guarantee trades amid volatile price swings. This has increased the pressure on European union officials to intervene.
In corporate news, Volkswagen (VOWG_p) shares were up 3.4% on the back of comments regarding its Porsche IPO. The carmaker published a so-called intention to float for an initial public offering in late September or early October. It is expected to be completed by the end of the year, but the listing and timing are “subject to further capital market developments.” The listing could become one of the world’s largest listings even in the current inflationary climate.
DAX 40 Daily Chart – September 6, 2022
Source: TradingView
From a technical perspective, we had a shooting star candle close last week which failed to close above the gap of the prior week. A shooting star formation usually indicates further downside.
On the daily timeframe we had a nice bounce yesterday while closing as a hammer candlestick, indicating upside to come. We continued the move in European trade today before finding resistance at the 23.6% fib level. If the index can maintain gains and close above the 23.6% fib level, we would have printed a morning star candle stick formation which is a sign of further bullish price action ahead. We trade below the 20,50 and 100-SMA while the gradients indicate a strong downward trend a retracement to retest the MA’s may be on the cards first.
Key intraday levels that are worth watching:
Support Areas
•12740
•12585
•12376
Resistance Areas
•12908
•13000
•13108
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Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter:@zvawda
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