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  • Stocks surge higher after surprising May jobs report.
  • EU in show of unity on virus.
  • DAX remains bullish at close, but strong resistance around 12.900.

Unexpectedly strong US labour market data continued to fuel the rally on the German stock market on Friday. The DAX boosted its gains and closed with a gain of 3.32 percent at 12,843 points. It was the highest closing since 25th of February. During the first five trading days in June, the benchmark German index climbed by more than 10 percent. Since mid-March, the index has surged by as much as 43.68 percent. Therefore, the DAX has almost completely recovered the losses from the Corona crisis.

The MDAX advanced by 1.64 percent on Friday, closing at 27,199 points, while the SDAX climbed by 1.78 percent. The TecDAX rose by 0.13 percent. 

Weaker quarterly results from the US tech sector last night fuelled fears of excessive stock valuations in the technology sector. Broadcom, for example, expects supply chain restrictions in the third quarter, which indicates a delay in the iPhone release. 

Slack, the office messenger and popular stay-at-home stock, surprisingly failed to show any acceleration in its sales when the quarterly figures were released. On Friday the stock collapsed by more than 13 percent.

Stocks surge higher after surprising May jobs report

Nevertheless, the NASDAQ100 reached a new record high on Friday. This was due to the robust U.S. employment report, which surprisingly showed a rise in jobs. In addition, the unemployment rate declined. 

US non-farm payrolls have risen 2.509 million in May versus a consensus estimate of a 7.5 million fall. “This was so far away from what anyone was expecting. It is simply astonishing given the slow pace of reopening and the fact that more than 12 million people filed a new unemployment claim during the survey period,” said James Knightley, Chief International Economist at ING.

But despite the good US labour market report, it is “still a long way back” to normality, he warned. “We also have to remember that even after today’s great numbers, US employment is still 19.55 million lower than it was in February”.

EU in show of unity on virus

But it was not only the US job report that gave the DAX wings in the last few trading days. It was a combination of the German government’s multi-billion euro economic stimulus package and the European Central Bank’s (ECB) 600 billion euro increase in the Corona emergency purchase program that made the difference. 

At the same time, the European Union is showing surprisingly unity in its political actions during the Corona crisis. This strengthens investors’ confidence in the economic bloc and is reflected in the massive decline in bond spreads in the eurozone. 

German DAX 30 key technical levels

From a chartist point of view, the DAX is clearly bullish. Reverse signals are rare. However, the index has now reached a key threshold. To be more specific, this is the lower limit of the pre-corona crash levels at 12,900 points. Only a surge over this hurdle would clear the way towards the record highs that were reached at the end of February at 13,795 points.

DAX dAily