DAX Index: Futures Flash Red as Investors Consider the US CPI Report

Highlights

• The DAX gained 0.65% on Monday, closing the session at 17,037.
• On Tuesday, ZEW Economic Sentiment numbers for Germany and the Eurozone will draw interest.
• Later in the session, the US CPI Report will warrant investor attention.

Overview of the DAX Performance on Monday

The DAX gained 0.65% on Monday. Reversing a 0.22% loss from Friday, the DAX ended the Monday session at 17,037.

ECB and US Consumer Inflation Expectations Softened

On Monday, investors reacted to comments from Bank of Italy Governor Fabio Panetta. The Bank of Italy Governor said inflation had eased quickly, and the time was nearing for the ECB to begin cutting interest rates. German Government Bond yields declined in response, driving buyer demand for DAX-listed stocks.

US consumer inflation expectations provided late support to the DAX. A consumer-based January survey showed consumers expect inflation to remain steady at 3%. The survey-based report preceded the all-important US CPI Report out on Tuesday.

On Monday, the Dow gained 0.32%. However, the S&P 500 and the Nasdaq Composite ended the session down 0.30% and 0.09%, respectively.

The Monday Market Movers

Siemens Energy AG rallied 5.01% as investors reacted to analysts upgrading its stock rating.

Retail-linked stocks were also among the front-runners on easing the dovish ECB comments. Zalando SE gained 3.40%, with Adidas ending the session up 1.46%.

Infineon Technologies continued to benefit from demand for tech stocks, gaining 1.86%. Further gains for Saab drove the buyer appetite for Rheinmetall AG, which rallied 3.65%.

Auto stocks also had a positive session. Mercedes-Benz Group gained 1.12%. Volkswagen and Porsche rose by 1.00% and 1.00%, respectively. BMW ended the day up 0.14%.

The Tuesday Session: Economic Sentiment

On Tuesday, ZEW Economic Sentiment numbers for Germany and the Eurozone will garner investor interest. Economists forecast the German ZEW Economic Sentiment Index to increase from 15.2 to 17.5 in February. However, economists expect the Eurozone ZEW Economic Sentiment Index to decline from 22.7 to 20.1.

A pickup in sentiment toward the German economy could influence investor sentiment. Recent economic indicators from Germany, including trade data, highlighted a weak demand environment. Improving sentiment toward the German economy could ease investor fear of a Eurozone economic recession.

Beyond the numbers, ECB commentary also needs consideration. ECB Executive Board members Claudia Buch and Anneli Tuominen are on the calendar to speak.

US CPI Report and US Corporate Earnings

Later in the Tuesday session, the US CPI Report will warrant investor attention. Economists forecast the US annual inflation rate to soften from 3.4% to 2.9% in January. However, economists expect core inflation to ease from 3.9% to 3.7%. Sticky inflation could reduce bets on the Fed cutting interest rates before June.

FOMC member reaction to the US CPI Report would move the dial. In recent speeches, FOMC members called for patience vis-à-vis the timeline for cutting rates. A Fed shift to a more dovish stance could drive buyer demand for riskier assets.

Beyond the economic calendar, US corporate earnings also need consideration. The Coca-Cola Company (KO) and Shopify Inc. (SHOP) are among the big names to release earnings results.

Short-term Forecast

Near-term trends for the DAX hinge on the US CPI Report, corporate earnings, and central bank commentary. Softer-than-expected US inflation numbers and central bank speeches favoring rate cuts could deliver a new DAX all-time high.

On Tuesday, the DAX futures and the Nasdaq mini were down 44 and 34 points, respectively.

DAX Technical Indicators

Daily Chart

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

A DAX move through the all-time high of 17,050 would bring 17,100 into play.

On Tuesday, euro area and US economic data, corporate earnings, and central bank commentary need consideration.

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

The 14-day RSI at 61.97 suggests a DAX move to 17,100 before entering overbought territory.

4-Hourly Chart

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

A DAX move to the all-time high of 17,050 would give the bulls a run at 17,100.

However, a drop below 17,000 handle would bring the 50-day EMA into play.

The 14-period 4-hour RSI at 61.97 indicates a DAX move to 17,100 before entering overbought territory.