Dax Index: As the DAX 30 Reels, All Eyes Turn to Powell at Jackson Hole

Highlights

• DAX breaks its three-day winning streak, falling by 0.68% to settle at 15,622.
• Hawkish sentiments around the Fed Chair resonate, casting shadows on riskier asset classes.
• Powell’s upcoming speech stirs anticipation.

Thursday Session Overview

The DAX ended a three-day winning streak on Thursday, falling by 0.68%. Reversing a 0.15% gain from Wednesday, the DAX ended the day at 15,622. The DAX rose to an early high of 15,897 before sliding to a low of 15,619.

Upbeat sentiment from the Asian equity markets failed to deliver a fourth consecutive day in positive territory for the DAX. NVIDIA (NVDA) earnings results from overnight on Wednesday took a back seat as investor focus turned to the Jackson Hole Symposium. Market fears of a hawkish Fed Chair weighed on riskier assets.

US private sector PMI numbers provided brief relief on Wednesday. However, economic indicators from Thursday suggested the need for a higher-for-longer interest rate environment. Initial jobless claims fell from 240k to 230k, reflecting tight labor market conditions.

Core durable goods orders were also upbeat, rising by 0.5% in July (June: +0.2%). Economists forecast a more modest 0.2% increase.

On Thursday, the NASDAQ slid by 1.87%, with the Dow and S&P 500 seeing losses of 1.08% and 1.35, respectively.

Thursday’s Market Movers

It was a bearish session for the auto sector. BMW and Volkswagen saw losses of 1.68% and 1.37%, respectively.

Mercedes-Benz Group and Porsche also struggled, declining by 0.81% and 0.92%, respectively. Continental AG saw a more modest 0.44% fall. Fear of a hawkish Fed policy outlook and concerns about China’s economy weighed on the demand outlook.

Bank stocks had a mixed session. Commerzbank slipped by 0.14%, while Deutsche Bank bucked the broader market trend, rising by 0.95%. Concerns over bad loans left Commerzbank on the back foot.

Infineon was among the worst performers, sliding by 2.49% as investors locked in profits ahead of the Fed Chair Powell speech.

Fed Chair Powell to Wrap Up the Week

The German economy is in focus this morning. German GDP numbers for the second quarter and Ifo Business Climate Index figures for August will move the dial.

Economists forecast the German economy to stall in the second quarter and to contract by 0.2% year-over-year. Private sector PMI numbers from Germany have been on a downward trend, suggesting that the German economy has deteriorated further in the third quarter. The Q2 GDP numbers will give investors a sense of how bad the second quarter was and how bad it could get in Q3.

Unsurprisingly, economists forecast further deterioration in business sentiment. Economists expect the Ifo Business Climate Index to fall from 87.3 to 86.7.

While the numbers will provide early direction, Fed Chair Powell will have the final say. Speaking at the Jackson Hole Symposium, hawkish forward guidance will weigh on the DAX. Tight US labor market conditions and sticky inflation suggest the need for a higher-for-longer interest rate environment. Dovish comments would support a late breakout.

ECB President Lagarde will also speak at the Symposium. However, we expect Fed Chair Powell to dominate.

DAX Technical Indicators

Despite the Thursday loss, the DAX held above the 15,600 – 15,525 support band. However, the DAX remained below the 50-day and 200-day EMAs, sending bearish near and longer-term price signals.

Looking at the 14-4H RSI, the RSI sits at 40.97, reflecting bearish sentiment, with selling pressure overweighing buying pressure. Significantly, the RSI aligns with the EMAs, signaling a fall through the upper level of the 15,600 – 15,525 support band to target sub-15,500.

Price action hinges on Fed Chair Powell.

For a look at the economic events, check out our economic calendar.

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