- Asian markets traded mixed on end of month flows
- The extension of Germany’s nationwide lockdown-lite could drag on regional risk assets.
- Additional fiscal aid could ease concerns.
DAX 30 index tests key resistance. Is a reversal lower on the cards?
Month-end flows combined with covid vaccine made for a mixed session in Asian trade. The ASX 200 index dropped1.26% as Australian & China trade tensions continue to escalate..
China’s CSI 300 index rallied 0.64%, supported by better-than-forecast PMI figures for November.
Looking ahead, German inflation data and a speech from European Central Bank President Christine Lagarde will be in focus.
Extended Lockdown to Weigh on DAX 30
The extension of Germany’s nationwide ‘lockdown -lite’ which started early November could limit the Dax’s potential upside, as Germany’s total coronavirus cases surpass 1 million.
Covid cases have tripled since the start of October, so Chancellor Angela Merkel and the premiers of Germany’s 16 states opted to extend restrictions until December 20.
Even so, cases remain stubbornly high with the 7-day average of infections hovering just under 18,000.
The possibility of extending restrictions until March has been raised.
Should infections remain high, the Dax could lose ground as investors start to price in tighter lockdown measures.
Budget Expansion May Underpin Regional Risk Assets
The federal government’s decision to expand its budget in 2021 could keep regional risk assets buoyant. The International Monetary Fund had appealed to the German government to provide further fiscal aid.
German policymakers announced almost €500 billion in total spending and doubled the amount of new debt budgeted for next year.