Germany’s foremost share index so far the best player in the Eurozone has started to lose foothold in the past few weeks and precariously setting for a jittery ride in the coming months while many traders place their bets that the European debt crisis will bound to stay to significantly threaten Europe and the rest of the world’s economy.
A spurt in Germany’s economic machinery along with the apprehension over the long overdue payables could lead to a halt in a Eurozone downturn that result in many investors to clear out their plans for their investments. The German equity funds have incurred four successive weeks of net returns from a research headed by the EPFR Global firm. Head of equities at Bastion Capital, Adrian Slack verbalised concerns regarding the poorly performing and debt ridden countries in the Eurozone namely Greece and Spain will soon spread out to southern European nations.
Leaders of the struggling union are scheduled to meet on the 28th of June to discuss their strategies to resolve the crisis that is plaguing much of Europe. Poor vitals are seen in Germany with index data by this June’s ZEW investor projected trouble in the coming months. Furthermore, Thomson Reuters I/B/E/S data supplemented the former data revealing expected negative earnings turning negative in the coming weeks.
In addition to the mounting problems burdening Germany, the country’s export performance is also coming under scrutiny as key emerging markets like China continue to slow down. Cameron Brandt, EPFR Global head of research mentioned that stocks are not the only ones to reveal signs stress but the safe haven for many investors such as German bonds is showing signs of substantial outflows as well.
The DAX has significantly risen approximately 8 per cent in 2012 making it much easier to target profit-taking than that of rival markets which already took a bad hit as many investors have noticed. Some have employed a technique in betting on a fall in the DAX and an increase in the underperforming European markets such as Spain’s IBEX or Italy’s FTSE MIB which are both down somewhere between 10 per cent-20 per cent year at present. The scheme behind this is rooted from the central bank’s intervention to maintain the world markets in the light of the European crisis that will potentially give a boost in the regional struggling performers all the while the DAX would increase in respectively.
Option market positioning is also quite ‘bearish’ so as to speak. Data coming from the Eurex exchange reveal that the number of ‘put’ options which gives the purchaser the autonomy to sell a security detail for a particular cost at a specific time. This is often used by investors to secure them from an unstable market.