Germany 30 – Q3 2020 Outlook
The Germany 30 or the DAX 30 index inched higher in Q2 2020, riding high on increased risk appetite due to the gradual re-opening of major economies. The DAX index has also been boosted by the announcement of a European Coronavirus Recovery Fund by the EU commission in May. This fund includes €250 billion in loans and €500 billion in grants to the worst hit EU nations.
It appeared that the index would return almost to its pre-pandemic highs on June 8, 2020, closing at 12,812 points. But reports of a drastic fall in German and French exports in April 2020, combined with reports of a decline in household spending and investment in the Euro Area in Q1, led to a huge decline on June 9, 2020.
Germany, once known as a frugal nation, is now expanding its spending activities to help the economy recover. Earlier in June, Chancellor Angela Merkel’s government announced plans to release another €130 billion through various schemes, including a cut in VAT.
However, Germany’s COVID-19 infection rate has jumped higher recently, after outbreaks in meat processing plants and religious communities. This could be a risk in the forthcoming months. The index could be trading at 11,622 points by the end of Q3.
Economic Data to Watch Out for in Q3 2020
July 2, 2020/ July 30, 2020/ September 1, 2020: Eurozone Unemployment Rate
The seasonally adjusted unemployment rate in the Eurozone rose to 7.3% in April 2020, below market expectations of 8.2%. The market expects the unemployment rate to rise to 8.5% in Q2.
July 9, 2020/ August 7, 2020/ September 8, 2020: German Balance of Trade
Exports declined 31.1% in April, leading to the trade surplus shrinking by €3.2 billion. As the French and Italian economies reopen, German exports are expected to increase in the Euro Area. Total trade surplus is expected to stand at €17.4 billion by the end of Q3.
July 14, 2020/ August 11, 2020/ September 15, 2020: German Zew Economic Sentiment Index
The economic sentiment index rose 12.4 points in June, from the May levels, to reach 63.4. This was the highest since March 2006. Investor morale is expected to increase with a new string of fiscal measures by the German government.
July 27, 2020/ August 25, 2020/ September 24, 2020: Ifo German Business Climate Index
The business climate indicator rose to 79.5 in May 2020, from a record low of 74.2 in April 2020. Investment sentiment is expected to surge to 85.1 in Q2. By Q3, the indicator could stand at 85.
August 14, 2020/ August 25, 2020: German GDP Growth Rate QoQ Prelim and Final Q2
German GDP growth contracted 2.3% YoY in Q1, the steepest contraction since the 2008 crisis. On a quarterly basis, the economy shrank 2.3% in Q1. A 10.6% quarterly decline is estimated for Q2. Faint recovery of 3.6% is expected in Q3 2020.
Q3 2020 Predictions: Political Events That Could Impact the DAX 30
President Trump has, for now, laid rest to fears that a deal with China stands cancelled. But, future tensions between the two nations could threaten market stability. On the home front, Brexit developments in the next three months will impact German companies. A no-deal Brexit could lead to subdued business climate and investor sentiment.
Q3 2020 Predictions: Other Factors That Could Impact the DAX 30
Rising infection cases in some parts of Germany is stoking fears of a second wave of the pandemic.