SAP earnings and rising Covid-19 cases push German equities lower
Global stocks declined sharply today as traders reacted to the rising number of Covid-19 cases, corporate earnings, and the fading optimism of stimulus in the United States. In Germany, the DAX index declined by more than 2%, with SAP being the biggest loser. The company’s shares dropped by 20% after it released weak results and guidance. In the UK, the FTSE 100 index dropped by 0.10%, with travel-related stocks like Rolls-Royce, Intercontinental Hotels, and IAG being the biggest laggards. Similarly, the pan-European Stoxx 50 dropped by more than 1.45%. In the United States, futures tied to the Dow Jones and S&P 500 dropped by more than 1%.
Global equities ignored the rising wave of corporate consolidation. Earlier today, Bayer, the embattled German company announced that it would acquire AskBio, a company that provides gene-editing services for more than $4 billion. In response, the stock rose by more than 1%. Elsewhere, Blackstone Group announced that it would acquire Safe Storage from Brookfield Asset Management in a $1.9 billion. In another transaction, Dunkin Brands said it would be acquired by Inspire Brands for $9 billion. Other recent deals include Conoco-Philips acquisition of Concho Resources and Pioneer Natural Resources acquisition of Parsley Energy.
The euro declined slightly as traders reacted to the rising number of Covid-19 cases in Europe. In Germany, health officials confirmed more than 11k cases earlier today. In a statement, the county's chief health officer said that a national lockdown will be necessary if daily cases rise to 20,000. Most countries in the region like Italy, Spain, and Ireland have also increased their movement restrictions. Meanwhile, traders reacted to the relatively weak sentiment data from Germany. According to the Ifo Institute, the business climate dropped from 93.2 to 92.7. Business expectations also fell from 97.4 to 95.0 in October.
The DAX index dropped to an intraday low of €12,258, which was the lowest it has been since July 31. On the four-hour chart, the price fell below the neckline of the head and shoulders pattern. It also moved below the dots of the Parabolic SAR and the 15-day and 25-day exponential moving averages. Similarly, the signal and main lines of the MACD are below the neutral line. Therefore, the index is likely to remain under pressure as bears aim for the next support at €12,200.
The EUR/USD declined to an intraday low of 1.1802, which was the lowest level since October 23. It was also along the 38.2% Fibonacci retracement level. The pair then pared back some of these losses and is now trading at 1.1826. On the 30-minute chart, the pair is now approaching the 23.6% retracement. The RSI has also moved from the oversold level of 30 to the current 47. It has also moved above the 14-day EMA and is now attempting to move above 28-day average. Therefore, the price is likely to continue rising, with the next target being at 1.1850.
The USD/JPY rose slightly as traders reacted to the rising number of Covid-19 cases. On the hourly chart, the price is forming an extended bearish flag pattern that is shown in pink. The force index is above the neutral line while the Relative Strength Index (RSI) is close to the overbought level. Therefore, in the near term, the pair is likely to remain in the current range, before breaking out lower.