DAX Index: ECB Rate Cut Bets, Corporate Earnings, and US Manufacturing in Focus

Highlights

• The DAX gained 0.32% on Friday, ending the session at 16,961.
• The ECB Inflation Expectations Survey fueled bets on an ECB rate cut one day after the Press Conference.
• On Monday, China, corporate earnings, the ECB, and the US economic calendar need consideration.

Overview of the DAX Performance on Friday

The DAX gained 0.32% on Friday. Following a 0.10% rise on Thursday, the DAX ended the session at 16,961. Significantly, the DAX extended its winning streak to three sessions.

German Consumer Confidence Sends Recession Signals

On Friday, German consumer confidence numbers for February sent the DAX to a session low 16,849. The German GfK Consumer Climate Indicator for February fell from -25.4 to -29.7.

However, rising bets on an ECB rate cut and euro area corporate earnings contributed to an early recovery.

On Friday, the ECB Survey of Professional Forecasters for Q1 2024 drove bets on an ECB rate cut. Survey respondents revised the Harmonised Index of Consumer Prices (HICP) inflation expectations from 2.7% to 2.4% for 2024 and from 2.1% to 2.0% for 2025.

Remy Martin and LVMH were among the big names on the earnings calendar. Better-than-expected earnings results fueled buyer demand for European equities.

US Personal Income/Spending and Inflation

On Friday, US personal income/spending and inflation figures tested the appetite for riskier assets. The Core PCE price Index increased by 2.9% year-over-year in December vs. 3.1% in November. However, personal spending jumped by 0.7%, with personal income rising by 0.3%.

Nonetheless, expectations of a soft landing and a softer inflation outlook consolidated gains for the session.

On Friday, the Nasdaq Composite Index and the S&P 500 ended the day down 0.36% and 0.07%, respectively. The Dow gained 0.16%. US corporate earnings results from Thursday pressured the Nasdaq Composite Index and the S&P 500. Intel Corp (INTC) slid by 11.91% as investors reacted to a disappointing outlook for Q1 2024.

The Friday Market Movers

Sartorius AG surged 9.90% on earnings results. Investors reacted to better-than-expected earnings and forecasts for 2024.

Zalando SE and Adidas benefited from luxury goods earnings results from France, gaining 2.81% and 1.24%, respectively.

Auto stocks recovered from Tesla Inc. (TSLA) fueled losses on Thursday. Mercedes Benz Group rallied 2.53%. Porsche and BMW ended the session up 1.15% and 1.15%, respectively. Volkswagen rose by 0.44%.

ECB Commentary and China in Focus

On Monday, investors must monitor ECB commentary throughout the session. ECB Vice President Luis de Guindos is on the calendar to speak. Reactions to the inflation expectations survey and comments relating to inflation and interest rates warrant investor attention.

However, stimulus chatter from Beijing could also move the dial. A convincing stimulus package from Beijing could drive buyer demand for riskier assets.

Corporate earnings will continue to influence the mood after better-than-expected results last week.

US Economic Calendar: Dallas Fed Manufacturing Index

On Monday, the Dallas Fed Manufacturing Index will garner investor interest. Economists forecast the Dallas Fed Manufacturing Index to decline from -9.3 to -23.0 in January.

Weaker-than-expected figures could test expectations for a soft landing. However, the numbers are unlikely to influence the Fed interest rate decision (Wed). The manufacturing sector accounts for less than 30% of the US economy.

Beyond the economic calendar, US corporate earnings also need consideration.

Short-term Forecast

Near-term trends for the DAX hinge on the Fed, euro area GDP and inflation numbers, and corporate earnings. Sticky euro area inflation numbers and a more hawkish-than-expected Fed could overshadow better-than-expected earnings.

In the futures, the DAX was down 58 points while the Nasdaq mini was up 1 point.

DAX Technical Indicators

Daily Chart

The DAX held well above the 50-day and 200-day EMAs, sending bullish price signals.

A DAX break above the Friday high of 16,968 would support a move to the all-time high of 17,003.

On Monday, China, the ECB, the US economic calendar, and corporate earnings need consideration.

However, a fall through the 16,850 handle would give the bears a run at the 16,750 handle.

The 14-day RSI at 64.99 indicates a DAX return to the 17,000 handle before entering overbought territory.

4-Hourly Chart

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

A DAX breakout from the Friday high of 16,968 would bring the ATH 17,003 into play.

However, a fall below the 16,850 handle would give the bears a run at the 50-day EMA.

The 14-period 4-hour RSI at 69.39 shows the DAX on the border with overbought territory. Selling pressure could intensify at 17,000.