DAX Performs Positively as Market Risk Mood Soars

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Germany stocks traded higher on Thursday, as Transportation and Logistics, Industrials, and Media sectors saw significant gains. At the close of the market yesterday (Frankfurt time), the DE30EUR (DAX) grew by about 0.4%, while the MDAX and TecDAX rallied by 0.87% and 0.08%, respectively.

The best performers under the DAX were Volkswagen (DE: VOW3), which spiked by 4.5%. The Deutsche Bank AG (DE: DBK) grew by 4.1%, while the MTU Aero Engine (DE: MTX) rose by 3.16%.

Meanwhile, the worst performers of the session were Infineon Technologies AG (DE: IFX), which dropped by 1.5%. The SAP SE (DE: SAPG) fell by 1.22%, while the Deutsche Boerse AG (DE: DB1G) ended the day with -1.1%.

Altogether, rising stocks outnumbered plummeting ones on the Frankfurt Stock Exchange by 438 to 241, while 31 remained unchanged.

Meanwhile, the DAX volatility index (V1XI)—which monitors the implied volatility of DAX options—dropped by 8% to 21.37, a six-month low.

In other news, President-elect Joe Biden has hinted at a whopping $1.9 trillion to bolster the US economy, one of the worst-hit of the COVID-19 pandemic. This announcement was the crucial supporting factor for risk assets and indexes, like the DAX, over the week.

Paul Donovan, Chief Economist at USD Global Wealth Management, explained in a podcast that “realistically, it will be a stimulus that hits the second quarter, rather than the first, as Congress is not going to pass this at once, and almost certainly will not pass the proposals as they stand.”

Donavan noted that the Democratic support for additional state and local government aid and minimum wage increase are both likely to trigger strong opposition from Republican Senators.

The 50-50 split in the upper chamber could expose some parts of the package to filibusters unless bipartisan support for the bill can be attained. However, a bipartisan agreement at the moment seems very unlikely considering the recent political tensions that swept through the country.

Meanwhile, recent expectations that the vaccine rollout will essentially end the pandemic by the middle of the year has been thrown into uncertainty. New mutations of the virus, crawling distribution of vaccines, and scattered evidence of issues about the effectiveness of the vaccines are all adding to the growing concerns plaguing the market.

In Germany, Covid-related deaths have hit a record high, as the country reported 1500 deaths just 24 hours ago. Across Europe, especially in the UK, public healthcare facilities have reached their maximum capacities and are under pressure to admit more.

That said, Germany might go with the UK in extending lockdown restrictions through the end of the first quarter at least. Google mobility data show that activities across the continent have dropped significantly at the start of the new year.