Germany is the fourth biggest economy in the world after the United States, China, and Japan. It has a GDP of more than $3.4 trillion. The DAX is the German equivalent to the US Dow Jones Industrial Average. This year, while the Dow has gained more than 5%, the DAX has lost more than 8%. This has happened as the growth in German companies continue to weaken. Sadly, this will likely continue today.
Yesterday, Daimler – one of the biggest constituents of DAX – reported that its sales were lower significantly which led to the firing of the CEO. These declines were attributed to the new energy standards. The same will likely happen to other companies like BMW and Volkswagen. In fact, just last week, Range Rover announced that its sales were significantly lower.
The German auto manufacturers are faced with several major problems. First, they have to invest heavily in the electric vehicle industry. This will suppress their margins. Second, the recently-enacted emissions standards which came after the VW scandal will lead to lower sales. Third, they are faced with a new threat about trade.
Yesterday, the DAX ended the day at £11,964. This was 164 points lower than the yesterday’s open. On the daily chart below, this price is along the lower band of the Bollinger Bands. As the growth problems continue to mount in Germany, the index is likely to continue moving lower.
