DAX Index: German Factory Orders and Trade Terms in the Spotlight

Highlights

• The DAX declined by 0.14% on Friday, ending the session at 16,594.
• On Friday, German retail sales and Eurozone inflation figures adversely impacted demand for DAX-listed stocks.
• The German economy will be the focal point of the Monday session.

Overview of the DAX Performance on Friday

The DAX declined by 0.14% on Friday. Partially reversing a 0.48% gain from Thursday, the DAX ended the Friday session at 16,594.

German Retail Sales and Eurozone Inflation

On Friday, German retail sales tumbled more than expected, fueling fears of a euro area economic recession. Retail sales fell by 2.5% in November, reversing a 1.1% increase from October.

Eurozone inflation figures for December supported recent ECB warnings of a higher-for-longer ECB rate path. The annual inflation rate accelerated from 2.4% to 2.9% in December. Elevated inflation and interest rates could further impact consumption and the euro area economy.

US Jobs Report and ISM Services PMI Offer Relief

A hotter-than-expected US Jobs Report and ISM Services PMI numbers delivered late support. Despite an upswing in wage growth and a steady unemployment rate, the numbers eased fears of a hard landing. Significantly, the ISM Services PMI survey highlighted softer price pressures and a fall in the service sector workforce.

The DAX recovered from a session low of 16,449. 10-year US Treasury yields pulled back from a Friday high of 4.101%, ending the session at 4.050%.

On Friday, the Nasdaq Composite Index and the Dow rose by 0.09% and 0.07%, respectively. The S&P 500 gained 0.18%.

The Friday Market Movers

Retail-orientated stocks continued to struggle, with recessionary fears impacting the outlook for consumption. Online retailer Zalando SE slid by 1.63%, with Adidas falling by 0.16%.

However, the financial sector saw further gains. Commerzbank and Deutsche Bank rose by 2.40% and 0.38%, respectively.

German Trade and Factory Orders in Focus

On Monday, the German economy will be in the spotlight. German factory orders and trade data will give investors a view of the demand environment midway through Q4 2023. Weaker-than-expected numbers could further fuel recessionary jitters and impact DAX-listed stocks.

Economists forecast factory orders to increase by 1.0% in November after sliding by 3.7% in October. Economists expect the German trade surplus to widen from €17.8 billion to €17.9 billion in November. Beyond the headline figure, investors must consider import and export figures for November.

Later in the session, economic indicators for the Eurozone also warrant investor attention. Retail sales and consumer confidence numbers could move the dial.

US Economic Calendar: US Inflation Expectations

Later in the Monday session, US inflation will be in focus ahead of the CPI Report on Thursday. Consumer Inflation Expectations for December will garner investor interest. A larger-than-expected fall in inflation expectations and easing fear of a hard landing could offer late support to the DAX.

Economists forecast Consumer Inflation Expectations to soften from 3.4% to 3.3% in December.

Beyond the numbers, FOMC member reactions to the US Jobs Report would move the dial. The bets on a Q1 2024 rate cut remained steady on Friday. Hawkish chatter could unsettle the markets.

In the futures, the DAX was up 2 points while the Nasdaq mini was down 2 points.

Short-Term Forecast

Near-term DAX trends will hinge on economic indicators from Germany and the US CPI Report. Weaker-than-expected German data and a pickup in US inflationary pressures could affect the buying appetite for DAX-listed stocks.

DAX Technical Indicators

Daily Chart

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

A DAX move through the Friday high of 16,646 would give the bulls a run at the Wednesday high of 16,784.

German and Eurozone economic indicators, US inflation numbers, and central bank commentary are in focus.

However, a fall through the 16,470 support level would bring the 16,290 support level into play.

The 14-day RSI reading of 55.94 suggests a DAX return to the 17,000 handle before entering overbought territory.

4-Hourly Chart

The DAX sat below the 50-day EMA while remaining above the 200-day EMA, sending bearish near-term but bullish longer-term price signals.

A DAX break above the 50-day EMA would support a move to the Wednesday high of 16,784.

However, a fall below the 16,470 support level would bring the 16,290 support level into play.

The 45.91 14-4 hour RSI suggests a DAX fall to the 16,290 support level before entering oversold territory.

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