DAX Index: German, Eurozone, and US Private Sector PMIs in Focus

Highlights

• The DAX declined 0.34% on Tuesday, ending the session at 16,627.
• ECB policy jitters, euro area, and US economic indicators impacted buyer demand for DAX-listed stocks.
• On Wednesday, euro area and US preliminary private sector PMIs warrant investor attention.

Overview of the DAX Performance on Tuesday

The DAX declined by 0.34% on Tuesday. Partially reversing a 0.77% gain from Monday, the DAX ended the session at 16,627.

Eurozone Consumer Confidence and Pre-ECB Caution

On Tuesday, investors turned cautious before the ECB monetary policy decision and press conference on Thursday. The markets are betting on the ECB cutting rates aggressively in H2 2024. However, ECB President Lagarde and other voting members recently warned the battle against inflation was not over and that the markets are getting ahead of themselves.

However, Eurozone consumer confidence figures for January contributed to the losses. The Consumer Confidence Index unexpectedly declined from -15.1 to -16.1. Economists forecast an increase to -14.3.

Richmond Fed Private Sector Data Signals Slowdown

On Tuesday, the Richmond Fed Manufacturing Index also pressured the DAX, falling from -11 to -15 in January. Economists forecast an increase to -7. However, the Richmond Fed Services Index rose from 0 to 4. Economists forecast the Services Index to decline to -5.

The Richmond Fed numbers failed to influence investor bets on a March Fed rate cut. According to the CME FedWatch Tool, the chances of a rate cut increased from 46.2% to 49.0% on Tuesday.

The Tuesday Market Movers

Auto stocks limited the downside for the DAX on Tuesday. Volkswagen rallied 5.41% on expectations the firm will beat Q4 sales figures. Porsche and Mercedes Benz Group ended the session up 2.93% and 1.57%, respectively. BMW gained 0.27%.

Retail-linked stocks also ended the session in positive territory. Zalando SE rallied 5.39%, with Adidas rising by 0.38%.

Hopes of more stimulus measures from Beijing contributed to the gains.

However, Rheinmetall AG and Heidelbergcement slid by 2.67% and 2.87%, respectively, dragging the DAX into negative territory. There were no apparent news events to contribute to the losses.

Euro Area Private Sector PMIs in Focus

On Wednesday, investors must consider euro area preliminary private sector PMIs for January. The German and Eurozone PMIs would likely impact DAX-listed stocks more.

Amidst rising fears of a Eurozone recession, weaker numbers could impact the appetite for riskier assets.

Economists forecast the German Manufacturing PMI to increase from 43.3 to 43.7 in January. Significantly, economists expect the German Services PMI to rise from 49.3 to 49.5.

Economists also predict less marked contractions across the Eurozone manufacturing and services sectors. For the Eurozone, economists forecast the Eurozone Composite PMI to increase from 47.6 to 48.0.

However, investors must consider the prices and employment PMIs. A pickup in prices and a higher rate of job creation could test bets on an H1 2024 ECB rate cut.

Beyond the economic calendar, China stimulus bets and overnight US corporate earnings also need consideration. On Tuesday, Netflix (NFLX) surged 8.18% in after hours trading on Q4 subscriber numbers.

US Economic Calendar: The US Services Sector in the Spotlight

On Wednesday, US private sector PMI numbers also need consideration. An unexpected pickup in service sector activity could temper bets on a March Fed rate cut.

Economists forecast the S&P Global Services PMI to fall from 51.4 to 51.0 in January. However, investors must consider the prices and employment sub-components. Tighter labor market conditions and higher wages could force the Fed to delay rate cuts.

The services sector accounts for over 70% of the US economy, influencing US inflation and labor market trends.

Away from the economic calendar, US corporate earnings could also move the dial. Tesla (TSLA) is among the big names to release results on Wednesday.

Short-term Forecast

Near-term trends for the DAX hinge on the German and US PMIs, the ECB press conference, and US inflation. Investor fears of higher-for-longer ECB and Fed interest rate paths could pressure the DAX. However, investors must consider corporate earnings and China stimulus measures.

In the futures markets, the DAX and Nasdaq Mini were up 81 and 60 points, respectively.

DAX Technical Indicators

Daily Chart

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

A DAX return to the 16,700 handle would support a move toward the January high of 16,964.

On Wednesday, euro area and US private sector PMIs need consideration.

However, a drop below the 16,600 handle would give the bears a run at the 16,470 support level.

The 14-day RSI at 53.16 suggests a DAX move to the 16,800 handle before entering overbought territory.

4-Hourly Chart

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

A DAX breakout from the Tuesday high of 16,753 would bring the January high of 16,964 into view.

However, a fall through the 50-day EMA would give the bears a run at the 16,470 support level.

The 14-period 4-hour RSI at 52.15 suggests a DAX return to the 16,800 handle before entering overbought territory.