Dax Index Forecast: Market Focus Shifts to PMI Data, ECB Commentary on Rate Path

Overview of the DAX Performance on Wednesday

The DAX gained 0.29% on Wednesday. Reversing a 0.14% decline from Tuesday, the DAX ended the session at 17,118. Significantly, the DAX held onto the 17,100 handle for the second time.

Eurozone Consumer Confidence Delivers Late Support

On Wednesday, a pickup in Eurozone consumer confidence drove buyer demand for DAX-listed stock late in the session. The Eurozone Consumer Confidence Index increased from -16.1 to -15.5 in February. Economists forecast an increase to -15.6.

Market bets on an April ECB rate cut continued to support the appetite for riskier assets. Investors are expecting the ECB to cut rates despite recent warnings from the ECB about cutting interest rates too early.

FOMC Meeting Minutes Offer No Surprises

After the European closing bell, the FOMC Meeting Minutes gave no surprises. The Minutes aligned with recent Fed speakers, who wanted more confidence inflation was sustainably returning to target before cutting rates.

Significantly, the FOMC meeting occurred before the consumer and producer price reports. Hotter-than-expected inflation numbers forced the markets to slash bets on the Fed cutting interest rates in March or May.

According to the CME FedWatch Tool, the chances of a 25-basis point June Fed rate cut slipped from 53.9% to 53.5% following the FOMC Meeting Minutes. The probability of a 50-basis point June rate cut declined from 21.7% to 17.1%.

However, European investors will react to NVIDIA Corp. (NVDA) earnings.

The Wednesday Market Movers

Auto stocks were among the best performers on Wednesday. BMW rallied 2.44%, with Mercedes-Benz Group and Volkswagen seeing gains of 1.93% and 1.27%, respectively. Porsche ended the day up 1.02%. The upside came before Mercedes Benz Group releases earnings on Thursday.

Measures in China to boost economic activity likely contributed to the gains.

However, bank stocks had a mixed session. Rising bets on an April ECB rate cut continued to impact Commerzbank, which declined by 0.33%. Deutsche Bank ended the session up 0.33%.

German and Eurozone Private Sector PMIs and Corporate Earnings in Focus

On Thursday, private sector PMI numbers will draw investor interest. A more marked contraction across the Eurozone private sector could fuel bets on a March ECB rate cut.

Economists forecast the German Manufacturing PMI to increase from 45.5 to 46.1 and the Services PMI to increase from 47.7 to 48.0.

Significantly, economists expect the Eurozone Manufacturing PMI to increase from 46.6 to 47.0 and the Services PMI from 48.4 to 48.8.

The headline numbers will influence market risk sentiment. However, investors must consider the sub-components, including prices. Softer wage growth and selling prices could support a more dovish ECB rate path.

Investors must digest the ECB monetary policy meeting minutes and monitor ECB commentary and reaction to the PMI numbers. ECB Executive Board Members Edouard Fernandez-Bollo and Anneli Tuominen are on the calendar to speak. Support for the ECB to cut rates sooner rather than later could drive buyer demand for DAX-listed stocks.

Beyond the economic calendar, corporate earnings also need consideration. Mercedes-Benz Group, AXA, Telefonica, and Fresenius SE are among the big names to release earnings.

US Services PMI, Jobless Claims, and Fed Speakers in Focus

On Thursday, the US Services PMI for February and weekly jobless claims data will draw investor interest. An unexpected pickup in US service sector activity could reduce bets on a June Fed rate cut. Economists forecast the US Services PMI to fall from 52.5 to 52.0 in February.

Beyond the headline figure, the prices and labor market sub-components could also move the dial. Upward trends in wages and selling prices and a pickup in job creation rates could delay a Fed rate cut.

However, labor market data must signal a marked shift in conditions to influence the Fed rate path. Economists forecast initial jobless claims to increase from 212k to 217k in the week ending February 17.

Beyond the numbers, FOMC members Cook and Jefferson are on the calendar to speak. Views on inflation, the economy, and timelines to cut interest rates need consideration.

Short-term Forecast

Near-term trends for the DAX will likely hinge on the service sector PMIs and central bank speeches. Weaker-than-expected Eurozone service sector PMIs could raise bets on an April ECB rate cut. However, corporate earnings remain a focal point.

On Thursday, the DAX futures and Nasdaq mini were up 96 and 257 points, respectively.

DAX Technical Indicators

Daily Chart

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

A DAX break above the Wednesday high of 17,158 would bring the all-time high of 17,199 into play. A breakout from the all-time high would support a move toward the 17,300 handle.

Private sector PMIs, central banks, and corporate earnings will move the dial.

However, a drop below the 17,000 handle would give the bears a run at the 50-day EMA.

The 14-day RSI at 61.63 suggests a DAX return to the ATH 17,199 before entering overbought territory.

4-Hourly Chart

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

A DAX return to the all-time high of 17,199 would support a move toward the 17,300 handle.

However, a break below the 17,000 handle would support a fall toward the 50-day EMA.

The 14-period 4-hour RSI at 58.08 indicates a move to the all-time high of 17,199 before entering overbought territory.