DAX Index Today: Impact of China Economic Data and Eurozone Inflation on Markets

The Overview of the DAX Performance

The DAX declined by 0.69% on Thursday (May 16). Partially reversing a 0.82% gain from Wednesday (May 15), the DAX ended the session at 18,739. Significantly, the DAX revisited the 18,890 handle before retreating.

The ECB and Corporate Earnings

On Thursday, ECB commentary garnered investor attention. Amidst rising bets on a June ECB rate cut, uncertainty about post-June policy goals lingered. ECB member Martins Kazaks fueled the uncertainty by tempering investor expectations of multiple 2024 ECB rate cuts. Kazaks reportedly warned the ECB is in no hurry to cut interest rates.

Corporate earnings also affected buyer demand for DAX-listed stocks. Siemens AG and Deutsche Telekom AG released corporate earnings results on Thursday.

US Jobless Claims and Fed Speakers Test Bets on a Fed Rate Cut

Later in the Thursday session, US initial jobless claims fell from 232k to 222k in the week ending May 11. Tighter labor market conditions could impact investor expectations of a September Fed rate cut.

FOMC member commentary also affected sentiment toward the Fed rate path. FOMC members Raphael Bostic and Loretta Mester signaled a higher-for-longer interest rate trajectory.

On Thursday, the Dow declined by 0.10%. The Nasdaq Composite Index and S&P 500 fell by 0.26% and 0.21%, respectively.

The Thursday Market Movers

Siemens AG tumbled 6.77% as investors reacted to a second-quarter profit drop.

The German auto sector also contributed to the losses. Daimler Truck Holding and BMW went ex-dividend, sliding by 5.29% and 6.26%, respectively. Mercedes Benz Group and Volkswagen saw losses of 0.99% and 0.70%, respectively. Porsche ended the session down 0.38%.

Commerzbank extended its gains from Wednesday, rising by 70% after better-than-expected profits, while Deutsche Bank declined by 1.25%.

China and Eurozone Inflation in Focus

Economic data from China will likely set the tone for the Friday session. Weaker-than-expected retail sales figures overshadowed an upswing in industrial production, testing buyer demand for riskier assets.

Industrial production increased 6.7% year-on-year in April after advancing 4.5% in March. However, retail sales were up 2.3% year-on-year versus 3.1% in March.

While the numbers from China will set the tone, finalized Eurozone inflation numbers also warrant investor attention.

According to preliminary numbers, the annual inflation rate remained at 2.4% in April, unchanged from March. Revisions to the preliminary figures could influence sentiment toward the ECB rate path. A downward revision could boost buyer demand for DAX-listed stocks.

Beyond the numbers, investors should continue tracking ECB commentary. ECB Executive Board member Luis de Guindos is on the calendar to speak on Friday. Views on the ECB rate path beyond June would need consideration.

US Economic Calendar: The Fed in Focus

Later in the Friday session, FOMC member chatter could influence market risk sentiment. After calls for a higher-for-longer Fed rate path on Thursday, FOMC member Christopher Waller is on the calendar to speak.

Views on inflation, the labor market, and the Fed rate path will garner investor interest. Before the April reports, Christopher Waller favored a higher-for-longer Fed rate path. A deviation from his previous view could move the dial.

Near-Term Outlook

Near-term trends for the DAX will hinge on inflation numbers for the Eurozone and central bank commentary. Softer-than-preliminary inflation numbers for the Eurozone and support for post-June ECB rate cuts could drive buyer demand for DAX-listed stocks. However, hawkish FOMC member chatter could test market risk sentiment.

On the Futures markets, the DAX and the Nasdaq mini were down 48 and 3 points, respectively.

DAX Technical Indicators

Daily Chart

The DAX sat comfortably above the 50-day and 200-day EMAs, affirming the bullish price signals.

A DAX breakout from the Wednesday (May 15) all-time high of 18,893 could give the bulls a run at 20,000.

Eurozone inflation numbers and central bank commentary need investor consideration.

However, a break below 18,750 could signal a DAX fall toward the 18,500 handle.

The 14-day RSI at 64.30 indicates a return to the Wednesday all-time high of 18,893 before entering overbought territory.

4-Hourly Chart

The DAX remained above the 50-day and 200-day EMAs, confirming the bullish price trends.

A DAX return to the all-time high of 18,893 could support a move toward 20,000.

Conversely, a DAX drop below the 18,800 handle could give the bears a run at the 18,500 handle.

The 14-period 4-hour RSI at 60.72 indicates a DAX return to the Wednesday all-time high before entering overbought territory.