European shares weakened on Friday as fears of a third wave of the COVID-19 pandemic loomed over the continent. DAX index continues to trade above 14,500 support, but further turmoil should not be discounted despite this.
The German DAX weakened on Friday, pressured by the fears of the third wave of a pandemic but managed to close in the green on a weekly basis. France imposed a fresh month-long lockdown in Paris and 15 other regions, and concerns amid the ongoing pandemic continue to worry investors.
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Concerns over the pace of vaccination campaigns in some European countries also represent a big problem and leaves little hope for the full reopening of economic activities.
“The current slow pace of the vaccination campaign leaves little hope for a full lifting of the restrictions after the end of the 4-week lockdown. The new lockdown will have a significant impact on economic activity and further deteriorate the economic outlook for the first part of 2021,” said Charlotte de Montpellier, economist, France, and Switzerland, at ING.
Some analysts are positive, and they think that many European countries will be in a position to lift some of the restrictions in the summer despite the slow vaccination process. They clearly see the light at the end of the tunnel, and it seems that the worst has been avoided.
It is also important to mention that the European Medicines Agency reported last week that the AstraZeneca vaccine is safe, despite lots of worries over possible side effects related to blood clots. The positive news is that the EU published the January Trade Balance and posted a modest surplus of €6.3 billion.
The German ZEW Survey showed that the Economic Sentiment improved in the country, but the policymakers hope for an economic comeback in the second half of the year. The European Central Bank would support the economy as long as the pandemic keeps taking its toll on economic progress and the degree of ECB’s concern will significantly influence stock markets in the near term.
Technical analysis: DAX index remains in a bull market
DAX index continues to trade in a buy zone, and if the price jumps again above 14,800 points, the next target could be around 15,000 points. On the other side, if the price falls below 14,000 points, it would be a firm “sell” signal, and the next target could be around 13,500 points.
According to the technical analysis rules, 13,000 points represent a powerful support level, and as long the price is above this support, there is no indication of the trend reversal.
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Summary
The German DAX weakened on Friday, pressured by the fears of the third wave of a pandemic but managed to close in the green on a weekly basis. DAX index continues to trade in a buy zone, and if the price jumps again above 14,800 points, the next target could be around 15,000 points.
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