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Oct 26, 2020, 10:50 AM GMT

Gloomy Times Ahead for the German DAX Index

The German stock market was not even able to recuperate fully from the initial coronavirus crash, and now, the second epidemic wave is already knocking on the door of the biggest economy in Europe. By all accounts, it looks as though it is going to be a very long winter indeed, with the number of confirmed cases expected to continue surging into 2021.

Eventually, the German Government is going to be compelled to tighten the containment measures in the country once again, which would most likely discourage European investors even more.

The recently released industry numbers in Germany mostly disappointed, given that the Services PMI tumbled more than it was initially expected, which encapsulates the impact of the coronavirus fallout on the tentative economic recovery in Germany. The reintroduction of more stringent lockdown measures is likely to exacerbate this adverse impact further.

The upcoming meeting of ECB's Governing Council on Thursday would be of crucial importance for the future of the DAX, given that the underlying monetary policy of the central bank could cushion the coronavirus-related ills of the index. Whether or not the Council would decide to intervene further remains to be seen. At the present rate, the fundamental outlook does not look too good for German stocks, as the DAX could find itself in the early stages of establishing a new downtrend.

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