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Germany : Cash laden funds dip toe in equity markets

The German DAX edged up to its highest level since mid March on Wednesday, despite being held in check by a two percent fall in Daimler Chrysler, as cash laden funds dipped a toe in the equity markets.

The ECB's decision to leave key interest rates unchanged saw the index tumble 60 points, but the news was soon brushed off and put aside on hoes a cut was not far off in any event. The DAX rose to an intraday high, just shy of the key 6000 psychological level and was 0.86 % higher at 5964 pints by later trade.

The Neuer Markt's flagship Nemax 50 index was 4.53 % higher at 1527.30. The market was lumbered by Motorola conference call at which the mobile phone giant, who posted its first quarterly operating loss in fifteen years on Tuesday, said it expected a second quarter sales to increase somewhat from the first quarter.

Market participants said they had noticed fresh investment interest in selected DAX stocks and in the Neuer Markt from major investment funds.

Readiness for risk taking high, says Mobashar

Germany's Neuer Markt Nemax 50 hovered cautiously in positive territory on Friday, trading up over 2 % as retail investors followed the technical rebound sparked by institutional buyers the day before.

Index heavyweights such as Dutch biotech group Oiagen, German chipmaker Aixtron and German software group Intershop were the main gainers as day traders sought to pick up some bargains.

"Yesterday it was the funds, but today we are seeing a lot of day trade in the market as well as some short covering," said Mobashar Ahmed, Chief Analyst at futuresdata.net.

The flag ship index of the top fifty growth stocks staged an impressive U - turn late on Thursday gaining over 9 % on institutional short covering after slumping to a fresh all time low of 3022 points only a few hours earlier.

The DAX also traded firmer, bolstered by short covering in technology majors Siemens and its semiconductors unit, Infineon, as well as sharp gains from Deutshce Telcom. By late trade, the Nemax 50 was 2.44 % higher at 3536.89 points and the DAX was up 1.16 % at 6677.45 points.

Thursday's rally took pace in the absence of direction from the New York markets, closed for Thanksgiving day and Mobashar Ahmed was unsure whether it would hold. "We will continue to take our cue from the Nasdaq," he said, "I am not so sure this rise will really last."

The recent rally was a normal bounce back from a traditionally volatile Neuer Markt. "Steps of 700 or 800 points are quite normal in this market," Mr Ahmed said. He added that Neuer Markt investors had not learned their lesson, despite seeing a 20 % slide in the index in just over one week, stoked by over valuations, earnings jitters and corporate scandals.

"The readiness to take risks in this market is still very high and it could increase over the next couple of months." The market was expected to remain in a period of technical recovery over the next week, with resistance of 3720 points.