Germany´s interior minister Seehofer announced earlier that a deal has been reached regarding the tightened border controls that he was demanding. His threats to quit led to fears that Merkel´s government is on the brink of collapse. Such a scenario would have been catastrophic, with the renewed political uncertainty hurting business confidence and the stability of the European Union.
While a potential trade war and concerns about the political situation in Italy continue to weigh on sentiment, investors - especially in Germany - are now relieved. This opens the door for a recovery rally in the DAX, which has been suffering in recent weeks.
A clear break above the falling trendline from the June high would pave the way for another test of the 12.500 resistance level. There, the DAX is likely to struggle somewhat. Should the index manage to overcome that hurdle as well, the next bull target would lie around 12.720 points (200 DMA).
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Stocks soar, powered by first-rate earnings and a dazzling run of economic data; Gold plays catch as G10 falls flat while oil basks in the afterglow