why the Dax rally today

Discussion in 'Index Futures' started by Kicking, Jan 2, 2006.

  1. any particular news behind this rally after Friday's selloff ?
  2. first trading day of the year perhaps.
  3. It did the same last year (big hint).

    (a.k.a. NihabaAshi) Japanese Candlestick term
  4. Lorenzo


    European Economies: Manufacturing Grows, Unemployment Falls
    Jan. 3 (Bloomberg) -- European manufacturing grew at the fastest pace in 16 months in December and German unemployment dropped the most in more than 15 years.

    An index of manufacturing rose to 53.6 from 52.8 in November, said NTC Research Ltd., which compiled the measure based on a survey of about 3,000 purchasing managers for Royal Bank of Scotland Group Plc. A level above 50 indicates growth. The number of Germans without work dropped by 110,000, the most since the country unified in 1990.

    ``This is a very strong start to the year,'' said Ian Stewart, chief European economist at Merrill Lynch & Co. in London. ``The composition of this recovery is changing and starting to be more domestic-led with real improvements in labor markets.''

    The euro's decline against the dollar the past year and a retreat in oil prices have shored up executives' confidence at companies such as Adidas-Salomon AG and prompted economists to raise their forecasts for growth this year. With export growth starting to fuel domestic spending, the European Central Bank has more leeway to raise interest rates in the dozen euro nations.

    European stocks and the euro rose while bonds fell. The Dow Jones Stoxx 50 Index climbed to the highest since May 2002, rising as much as 1.2 percent to 3399.10. The yield on the benchmark 10- year German government bond gained 3 basis points to 3.35 percent. Yields move inversely to bond prices.

    Adidas, Bayer Hiring

    Europe's single currency, which has dropped 11 percent against the dollar in the past year, rose to $1.1888 from $1.1820 yesterday.

    Growth is accelerating as companies including Adidas and Bayer AG step up hiring and investment, raising optimism that consumers will spend more and bolster Europe's export-driven economy. Adidas, the world's second-largest maker of sporting goods, said Dec. 30 it will hire 150 people at locations including its Herzogenaurach headquarters in Bavaria.

    Euro-region manufacturers added jobs for the first time since May 2001 last month and orders and output climbed at their fastest pace since July 2004, today's report showed. The overall index was the highest since August 2004.

    In Germany, Europe's largest economy, unemployment dropped more than ten times what economists had forecast as milder weather lifted hiring in construction. The adjusted jobless rate fell to 11.2 percent from 11.4 percent.

    `Durable Growth'

    ``The consumer spending situation is improving in Europe, that's what we need to ensure durable growth,'' said Dominique Barbet, senior economist with BNP Paribas in Paris.

    Germany's DIW research institute today raised its forecast for growth, saying an export-led expansion will induce companies to increase spending. The Berlin-based organization raised its growth prediction for the German economy to 1.7 percent from the 1.5 percent it forecast June 29.

    Unemployment in Germany is nevertheless still close to a post-World War II high of 12 percent, and joblessness is keeping a lid on growth across the continent.

    While the European Commission expects euro-region growth to accelerate to 1.9 percent this year from 1.3 percent in 2005, that would still be the fifth year in a row it's lagged behind the U.S. The commission says the world's largest economy will probably expand 3.2 percent in 2006.

    ``The euro zone's upturn is still young and relatively fragile with significant question marks still hanging over the long-term strength of domestic demand,'' said Howard Archer, chief European economist at Global Insight Inc. in London.

    Foreign Demand

    For now, growth is still mostly driven by foreign demand as the weaker euro makes goods cheaper abroad and lower oil prices ease pressure on manufacturers.

    Continental AG, the world's fourth largest tiremaker, based in Hanover, Germany, said Dec. 30 it plans to increase sales in 2006 for the 13th straight year, helped by increasing demand in Asia. The price of crude has dropped 13 percent since it touched a record $70.85 per barrel on Aug. 30.

    In Germany, Europe's largest economy, executives were most optimistic in five years in December and Italian business confidence also increased last month.

    In France, the economy grew 0.7 percent in the third quarter, the strongest pace in almost a year, the government said today, confirming its previous estimates. Together, Germany and France account for about half the euro region economy.

    Interest Rates

    Today's reports may give the ECB more confidence to raise rates again after it last month lifted borrowing costs for the first time since 2000.

    ``These type of indicator puts the ECB in a position to raise rates again,'' said Olivier Gasnier, an economist at Societe Generale SA in Paris.

    The Frankfurt-based central bank on Dec. 1 increased its benchmark rate by a quarter of a percentage point to 2.25 percent, lifting them from a six-decade low.

    In December, the inflation rate probably held to 2.2 percent, down from 2.3 percent in November, the median forecast of 21 economists polled by Bloomberg showed. The EU's statistics office is due to publish the December report tomorrow.

    Interest-rate futures suggest investors expect the ECB to raise borrowing costs at least twice this year. The yield on the three-month Euribor contract due June 2006 was 2.93 percent. The contract settles to the three-month euro area inter-bank offered rate for the euro, which has averaged 15 basis points more than the ECB's benchmark rate since the currency's launch in 1999.

    Adding to expectations of rising rates, ECB Chief Economist Otmar Issing told Germany's Boersen Zeitung in an interview published Dec. 30 that the bank will ``always'' react if the inflation outlook worsens. ECB council member Guy Quaden said the previous day rates won't stay at the current level ``eternally.''

    The ECB's 18 rate-setting governing council is next scheduled to decide on rates on Jan. 12 in Frankfurt.

  5. excellent point , thanks for reminding us
  6. dax is rallying 90-100 points and more everyday. Even the high oil prices are popping but who cares. I know only one thing that "market is always right." NO EXCEPTION. :)
  7. Amnesiac


    Ok, now it has finally happened. The Dax was more than positively mentioned in the "BILD-Zeitung", the newspaper with the most readers in Germany (Actually a "yellow press" newspaper like The Sun in the UK).

    Just looking at these pictures from today's edition makes you want to sell..




    Here is the link to today's article about the dax (in german): http://www.bild.t-online.de/BTO/gel...echststand2006,templateId=renderKomplett.html
  8. Thanks! Nice article... textbook bubble psychology.
  9. fader


    yeah, i love it when they are advertising this just as the volatility is increasing at the top here, $vdax has been steadily rising since the beginning of the year... let's get the public in for a wild ride... - hard to say how much more the europan markets will go up without the u.s. (even after adjusting for the euro/dollar fx rate), i.e. difficult to imagine them having another 20%+ year unless the u.s. market rises this much this year, i.e. my guess is that the correlation will start to revert back to the mean...