DAX Index: German Business Sentiment and Deutsche Bank Earnings in Focus

Highlights

• The DAX gained 0.54% on Tuesday, ending the session at 14,880.
• On Wednesday, German business sentiment will draw interest after the flash private sector PMI numbers.
• Corporate earnings will also move the dial, with Deutsche Bank releasing earnings results.

DAX Tuesday Overview

On Tuesday, the DAX gained 0.54%. Following a 0.02% gain on Monday, the DAX ended the day at 14,880.

Corporate Earnings Mute Recession Signals

On Tuesday, prelim private sector PMI numbers from Germany and the Eurozone sent the DAX into negative territory. An unexpected contraction in the German services sector raised the prospect of a German recession. More marked contractions across the Eurozone private sector fueled bets on a Eurozone recession.

However, a better-than-expected US services PMI and corporate earnings drove buyer demand.

Importantly, 10-year US Treasury yields failed to revisit recent peaks, supporting riskier assets.

On Tuesday, the Nasdaq Composite Index ended the day up 0.93%, with the S&P 500 and Dow gaining 0.73% and 0.62%.

The Tuesday Market Movers

MTU Aero rallied 6.10%, with defense stock Rheinmetall AG gaining 3.18% on Tuesday. Adidas was also a front-runner, rising by 1.79%. Puma retained its full-year profit forecast, supporting Adidas.

However, bank stocks ended the session with heavy losses. Commerzbank and Deutsche Bank AG ended the Tuesday session down 1.62% and 1.18%.

The auto sector was also a drag on the DAX.

Porsche and BMW fell by 1.01% and 0.86%. Volkswagen and Mercedes Benz Group saw losses of 0.45% and 0.28%, with Daimler Truck Holding declining by 0.27%. Recessionary fears weighed on the demand outlook. On Monday, Volkswagen cut its profit margin outlook, which resonated on Tuesday.

Tuesday Focus: German Business Sentiment and Earnings

Business sentiment will be in the spotlight on Wednesday. Economists forecast the German Ifo Business Climate Index to rise from 85.7 to 85.9 in October. Despite the disappointing headline private sector PMIs for October, the survey revealed firms were less pessimistic. An improving outlook may offer support for DAX-listed stocks. Economists forecast the Ifo Expectations index to increase from 82.9 to 83.3.

Beyond the numbers, corporate earnings also need consideration. Deutsche Bank will release earnings results on Wednesday.

US Housing Sector and Earnings in the Spotlight

Housing sector figures from the US will draw interest later in the Wednesday session. Economists forecast new home sales to tumble by 11.0% in September (Aug: -8.7%). A deteriorating US housing market could be an early warning sign for the US economy.

While the numbers warrant consideration, US Treasury yields and corporate earnings will likely dictate buyer appetite for riskier assets.

After earnings results from Alphabet (GOOGL), Coca-Cola (KO), General Electric (GE), General Motors (GM), and Microsoft (MSFT), Meta Platforms (META) will be in the spotlight.

The futures markets point to a mixed Wednesday session. The DAX was up 23 points, while the Nasdaq mini was down 42 points.

Short-Term Forecast

Corporate earnings must continue to fuel demand for DAX-listed stocks. German and euro area recessionary jitters will remain a headwind as investors look ahead to the ECB monetary policy decision.

DAX Technical Indicators

Daily Chart

The DAX remained below the 50-day and 200-day EMAs, affirming bearish price signals. Significantly, the 50-day EMA converged on the 200-day EMA. A bearish cross of the 50-day EMA through the 200-day EMA would pressure the DAX.

A DAX break above the 14,957 resistance level would support a return to 15,000. German business sentiment and corporate earnings will be focal points today.

The 14-day RSI reading of 35.64 indicates a DAX drop below 14,750 before entering oversold territory.

4-Hourly Chart

The DAX sits below the 50-day and 200-day EMAs, reaffirming bearish price signals. A DAX break above the 14,957 resistance level would give the bulls a run at the 50-day EMA.

However, a fall through 14,800 would support a move toward the 14,575 support level.

The 40.05 14-4 hour RSI reading indicates a DAX return to 14,750 before entering oversold territory.

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