WEEK AHEAD: SEPT 13

Short Description

The DAX index is turning from the DAX 30 into the DAX 40! I discuss what changes are happening and what they mean for trading the index. Also on tap this week Apple is expected to release its new iPhone 13 and US CPI and retail sales data is out. Thanks!

Video Script

Hi everyone, the DAX index is going through a big change - it’s turning from the DAX 30 into the DAX 40! I discuss what changes are happening and what they mean for trading the index. Also on tap this week Apple is expected to release its new iPhone 13. And lastly, I’ll rundown the top items in this week’s economic calendar, including US CPI and retail sales data.

 

The DAX is the benchmark stock index for Germany and it is going through its biggest reorganisation in decades. Deutsche Boerse, which owns the DAX, will add 10 new stocks into the index, increasing the total from 30 to 40. This change takes place next Monday - September 20^th - so it’s good to prepare for it ahead of time.

 

Why are they doing this? It’s largely because of the Wirecard scandal. As you may remember Wirecard was a part of the DAX index when it imploded over fraud allegations and has since become insolvent. This did big reputational damage to the German market. The changes - including stricter rules on qualitative factors like corporate governance and a requirement to have been profitable for the past two years - are part of a plan to rebuild confidence.

 

And what does trading the DAX40 instead of the DAX30 mean for index traders? Firstly more stocks will bring higher trading volumes, which is good for liquidity. Secondly the index is now 25% more diversified than it was - meaning it will be less influenced by moves in one or two stocks. However it is still weighted by market cap so the biggest companies will still have the biggest influence. The newer companies will also tend to be faster growing and less orientated in heavy industry. In my view these are all welcome changes and should make for a better trading experience.

 

Now - for the iPhone fans watching - of course I should mention it’s a big week for Apple. The Apple product launch day is scheduled for Tuesday September 14^th - and we can expect Apple stock to be in focus. The tradition is that Apple shares get a boost amid the excitement about the new products before the launch - and then drop back afterwards when high expectations are disappointed. So what are the expectations this time?

 

It’s widely expected Apple will release its latest iPhone model - the iPhone 13 including variants like the mini, pro and pro max. It will be the second 5G-enable iPhone with the same design as the iPhone 12 but with upgraded screen resolution, camera features and potentially LEO satellite communication where you will be able to make a call even when there is no mobile reception. Apple shares are up around 17% this year.

 

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OK let’s round off with the economic calendar. It’s a slow start on Monday but Tuesday sees one of the week’s most important release in US CPI. Consumer price inflation sat at decade-highs of 5.4% in June and July. Economists expect it to have come down a bit in August but obviously ongoing high levels of inflation put pressure on the Fed to taper sooner. China retail sales data is expected to have accelerated in August and that should be a tailwind for China equities as well as the Aussie and Kiwi dollars. Lastly, disappointing US retail sales data has been a drag on US growth expectations - another decline in August could weigh on the dollar.

 

Right thanks everyone, good luck trading this week and make sure to click on subscribe so you don’t miss the next episode of the week ahead.