Germany Slips into Recession:
Germany experienced a recession in the first quarter of 2023, with a 0.3%
contraction in output compared to the previous three months. This followed
a 0.5% decline in the fourth quarter of 2022, highlighting the impact of a
winter recession on Europe’s primary growth driver.
ECB’s Efforts to Tackle Inflation:
To combat inflation, the ECB has gradually raised its key interest rate to
3.75% in seven steps. The central bank’s active interest rate policy, along
with falling energy prices, has contributed to a lower inflation estimate
compared to February. Inflation is gradually declining; however, it remains
well above the ECB’s target of 2%, therefore bank officials reaffirmed its
commitment to further hikes. Economists anticipate at least another
50-basis point rate increase in 2023, followed by a gradual decline in
interest rates in the coming years.
Moderation in inflation:
While some positive indicators emerged from the economic data in Europe on
Wednesday, such as a moderation in inflationary pressures across major
economies like Germany and France, the overall sentiment remained dampened
by the global economic outlook. The drop in headline inflation is
encouraging and suggests that the disinflationary trend in Germany is
gradually broadening. However, it is unlikely to prevent the European
Central Bank from hiking rates again.
Long Road Ahead for ECB Inflation Target:
According to a survey conducted by the Mannheim-based institute, financial
experts predict that the ECB’s inflation target of below 2% is unlikely to
be achieved before 2026. Despite expectations of a gradual slowdown in
inflation, rising wages are seen as a key driver of inflation, which is
projected to remain high at 5.8% in 2023.
German Inflation and Wage Growth:
Germany has experienced a significant increase in nominal wages, rising
5.6% year-on-year in the first quarter of 2023, which is the highest level
since 2008. However, high inflation has offset wage growth, resulting in a
2.3% decline in real wages during the same period. Collective bargaining
negotiations and strikes have disrupted various sectors, raising concerns
about excessive wage demands fuelling inflation further.
In conclusion:
Overall, Germany’s recession, the ECB’s inflationary challenges, and global
economic uncertainties have created a complex landscape for financial
markets. The ECB’s focus on controlling inflation remains a top priority,
as inflation rates continue to be above target.
Source: Tradingview, DAX Index Yearly Chart
DAX outlook – technical analysis:
The DAX 40 climbed to a fresh all-time high of 16,331 in May despite the
challenging global and regional macro backdrop. Bearish divergences between
the leading Relative Strength Index (RSI) indicator and the price have
formed on the weekly and daily charts, showing that internal momentum
conditions are deteriorating.
While at this stage there is no confirmation the primary up trend is
complete, the divergences are providing a preliminary warning that the up
trend from the September 2022 low might be approaching an inflection point.
We are closely monitoring key static and dynamic support from the
medium-term up trend line crossing at 15,770, as a break below it will be
the first red flag in regard to the sustainability of the uptrend. A break
below that level would signal a short-term top is in place which could
trigger a decline to 15,140 first and potentially to 14,800 over the
medium-term.
Seizing the advantages of leverage:
Active traders looking for magnified exposure to the German share market
may consider our +3x Long Germany 40 and -3x Short Germany 40 ETPs.
ETPs have revolutionized the way investors gain exposure to a variety of
asset classes, making investing more accessible, affordable, and
transparent. These investment vehicles offer several benefits that make them
an attractive choice for investors.
Our ETFs are designed to provide investors with a cost-effective way to
diversify their portfolios and gain leveraged exposure to a wide range of
assets, such as stocks, bonds and commodities that were once out of reach.
In summary, our ETPs provide a unique investment opportunity for investors
looking for diversification, leverage, flexibility, cost-efficiency, and
liquidity who seek to amplify profits in both rising and falling markets.
Market Insights
Education
Basket Builder
About
Why us
FAQs
Equities
Alternatives
Custom Baskets
Leverage & Inverse ETPs
Stock Tracker ETPs
All Products
