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DAX flutters indicate shaky German economy

Adding another headache to new chancellor Scholz who is battling anti-vaxxers and rising tensions in Ukraine

Germany’s DAX index is currently seeing a bit of a rebound, following some steep drops at the beginning of the week.

The index reached a high of 15,697.55 on Friday, but then fell gradually to bottom out at 15,011.13 on Monday. Since then, it rose and fell repeatedly until yesterday when it started to climb again. From there, it reached 15,512.36 in the mid-afternoon, but has since fallen and risen again.

While there was no widespread panic, some alarm bells have rung within the German media. Tagesschau asked, “How low can the DAX fall now?”

Writing earlier today, the broadcaster said: “The upward correction in the DAX comes to an abrupt end today. The German standard values fall by 1.5% to 15,231 points at the start of trading on XETRA. The DAX thus closes its recent upward price gap (lower edge at 15,206 points) and at the same time loses a large part of its gains yesterday.”

It added: “That is why key support at around 15,000 points is once again coming into the focus of investors. At 14,953 points, the DAX had turned the curve yesterday and turned it into the plus. If the DAX does not find a foothold here either, a slide towards the striking October low (14,819 points) threatens.”

There have been a few alarm bells over the German economy in recent weeks, with a second recession being reported by Bloomberg. The reason for that, said the news service, was due to the Omicron variant, inflation, and drags on output caused by ‘supply snarls’.

At the end of 2021, ING was predicting a recession for the country in 2022. It wrote: “The German economy ends the year with another disappointment. Germany’s most prominent leading indicator, the Ifo index, dropped for the sixth month in a row in December, coming in at 94.7, from 96.5 in November. The last time the Ifo index dropped for six consecutive months was in 2018. The Ifo index now stands at its lowest level since February this year.”

This will not go down well in Berlin. New chancellor Olaf Scholz is currently dealing with a resurgent coronavirus pandemic fuelled by a hardcore contingent of anti-vaxxers. At the same time, his government outwardly supports Ukraine, while refusing to grant permission for weapons and other equipment to be exported there. It is a situation that has not gone unnoticed.

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