Euro-zone GDP rose by 12.7% in the third quarter, significantly exceeding market estimates of 9.4%.
The ECB Committee should continue to support the market with more incentives where necessary
The DAX index fell 8.61% this week, the largest weekly decline in more than 7 months
The DAX index closed the week down 8.61%, the worst weekly decline since early March. The number of new Covid 19 cases across Western Europe has increased in recent weeks, prompting governments to reintroduce blocking measures.
Basic analysis: GDP is recovering
France and Germany were forced to reintroduce national barriers to stem the spread of new infections. There is growing concern among investors that companies will continue to struggle through the winter, as governments are likely to focus on public health measures.
Euro-zone GDP grew by 12.7% in the third quarter, far exceeding market estimates of 9.4%. After a decline of 11.8% in the previous quarter, this represents a huge turnaround. This represents the strongest recovery in history.
“The eurozone economy regained momentum in the third quarter when the lockdown was ended, although a full recovery is still a long way off and a setback is now looming in the fourth quarter,” said Claus Vistesen, an economist with macroeconomic research services firm Pantheon Macro.
France is one of the countries with the highest bounce rate, as its economy grew by more than 18% in the three months to the end of September.
“The massive increase in French GDP in the third quarter is no consolation to French policymakers or households, who are now struggling with a second national freeze,” said Andrew Kenningham, chief economist for Europe at Capital Economics.
Meanwhile, Christine Lagarde of the ECB has pledged her support to the member states, saying that the bank is ready to support the market with more incentives if needed.
Technical analysis: DAX crashes
The DAX index fell 8.61% this week, the largest weekly decline in more than 7 months. The weekly low of 11450 is the lowest level of the blue chip index since the end of May.
DAX Index (Trading View)
The index stopped its fall at the main horizontal support line at 11440, thus preventing further losses. A break of this support would open the door for levels around the 10000 handle. On the upper side, the broken coincidence of two moving daily averages will now act as resistance above 12000.
A rapidly increasing number of new infections on the old continent has significantly depressed European stocks in the worst weekly sell-off since March.