Germany equities were lower at the close on Wednesday, as losses in the Technology, Insurance and Software sectors propelled shares lower. At the close in Frankfurt, the DAX declined 1.19%, while the MDAX index declined 0.93%, and the TecDAX index declined 1.67%. Declining stocks outnumbered rising ones by 536 to 169 and 70 ended unchanged on the Frankfurt Stock Exchange. The DAX volatility index, which measures the implied volatility of DAX options, was up 9.75% to 20.15. European markets closed in red yesterday despite positive macro data and favorable Italian budget negotiation related headlines owing to cautious investor stance in response to bearish rout in global equity markets. U.S. stock futures and Asian shares tumbled on early market hours today after Canadian authorities arrested a top executive of Chinese tech giant Huawei for extradition to the United States, feeding fears of a fresh flare-up in tensions between the two superpowers.
Risk Averse Investor Sentiment Was Further Aggravated Owing to Arrest of Huawei’s Chief Executive
The news came as Washington and Beijing begin three months of negotiations aimed at de-escalating their bruising trade war, which is adding to lingering investor jitters over higher U.S. interest rates and other risks to global economic growth. Canadian authorities said they had arrested Huawei’s global chief financial officer in Vancouver, where she is facing extradition to the United States on charge of violations of U.S. sanctions. The arrest heightened the sense of dread already prevalent in market owing to global economic slowdown woes and two consecutive sessions of bearish rout in equities as this could complicate trade related talks between China & USA inspiring bearish price action across key Asian equities. Huawei is one of the world’s largest makers of smartphones and telecommunications network equipment and latest news has initiated a sharp slump in technology shares of companies involved in semi conductor business as pressure and urging of US has caused various telecom operators from Britain, Australia and New Zealand to reject Huawei’s products citing security concerns.
Recent macro data from Euro zone as well as Germany paint a positive picture of economic conditions and business progress in German market. Both German Composite & Services PMI saw better than expected data and the scenario is further boosted by declining spread difference between IT-DE government bonds over positive comments from Italy’s deputy PM Luigi Di Maio on budget negotiations which indicates a solid fundamental support for Germany economy. While bearish rout in global equities over last two days have inspired a risk averse investor sentiment in financial market resulting in bearish price action across key equity markets downside could be limited considerably over positive German economic climate. DAX futures trading in international market is down by 1.44% on the day ahead of European market hours suggesting possibility of range bound price action in German equities with bearish bias.