DAX Attempts Recovery from Week’s Lows – Faces Layoffs and Contracting GDP
DAX continues decline after a bearish week of trading, tech stocks rally disspates. Negative data still looms, with more layoffs announced and a contracting GDP.
- Various firms announce flurry of layoffs
- GDP YoY contraction greater than expected
- Tech stocks rally give some momentum
The DAX traded higher this morning, gaining 0.4% after gaining 1.4% yesterday from its low. At the time of writing the index was down 0.69%.
The tech stock rally fueled the reversal of the week’s downward trend. But the German stock index has concerns of its own, and the momentum dissipated early.
Layoffs planned at major EU companies
Frankly, I don’t see how the continued bad news for manufacturing and growth can sustain the German stock market. We’ve already seen automakers’ plans for plant closures and lower revenue forecasts.
The string of companies that have announced plans to reduce their workforces continues to widen. Among them some important German firms too.
The list includes:
- DNB (DNB): 500 jobs over 6 months
- Santander (SAN): 1,400 jobs from the UK unit
- Unicredit (CRDI): 500 jobs
- Michelin (MICP): 1,250 jobs
- Schaeffler (SHAO): 4,700 jobs
- Auchan: 2,000 jobs
- Airbus (AIR): 2,500 jobs
- Infineon (IFXGn): 1,400 jobs
- Lufthansa (LHAG): 20% cut in administrative positions
- SMA Solar (S92G): 1,100 jobs
The list is wider, but these are the main companies for size of capitalization and importance of headcount reduction. Schaeffler stated it was hit by weak demand from auto and industrial parts.
Infineon will also relocate a further 1,400 jobs to locations worldwide with lower labour costs. The picture doesn’t seem too rosy for the EU economy, and for the German economy in particular.
GDP Growth Continues in Contraction – PMI Disappoints
GDP Growth data released for Q3 YoY and QoQ, the results were mixed. With QoQ Q3 showing a slight expansion of 0.1%. However, data for Q3 YoY showed the contraction continued, and was more than expected at -0.3%.
Today’s data today confirms 5 straight quarters of contraction. The technical metric to consider recession is two quarters of contraction.
PMI data also added to the cloudy outlook for growth, The DAX plunged 230 points or 1.2% shortly after the release. The Services PMI fell to 49.4 from 51.6, a number below 50 is an indication of contraction.
While the Manufacturing PMI rose to 43.2, it still remains well below 50, and the Composite PMI also fell to 47.3 from 48.6.
The DAX has been showing signs of technical weakness and we still have to see a break below recent support levels before calling the bear trend.
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