Dax Index News: Bundesrat Vote Looms as DAX Opens Lower – Outlook and Analysis

DAX Opens Lower as Germany’s Bundesrat Vote Looms

Germany’s Bundesrat, the upper house of Parliament, is set to vote on the fiscal reform bill on Friday, March 21. Markets expect its approval, shifting focus to the bill’s implementation and spending plans—key drivers of Germany’s GDP growth outlook.

The DAX Index opened lower on Thursday, March 20, slipping 0.02% to 23,283. Caution ahead of Friday’s vote dragged the DAX into the red early in  the European session.

Sector Performance: Auto Stocks Decline, Tech Stocks Advance

The markets caution ahead of Friday’s upper house vote weighed on bank, construction, and defense stocks.

Rheinmetall AG fell 0.32%, while Heidelberg Materials AG dropped 0.46%. Aerospace stocks Airbus and MTU Aero Engines posted losses of 0.48% and 0.23%, respectively. Commerzbank slid by 2.11%.

Auto stocks also gave up recent gains.

BMW and Mercedes-Benz Group fell 0.33% and 0.38%, with Volkswagen and Porsche also declining early in the session.

Early losses reflected the significance of Friday’s vote, which overshadowed Wedneday’s dovish Fed policy outlook.

German Producer Prices Signal Improving Demand

Germany’s producer prices increased 0.7% in February year-on-year (YoY), up from 0.5% in January. The increase suggests rising demand as producers pass higher costs on to customers. As a leading inflation indicator, rising prices could signal a higher inflation outlook.

However, market reaction to the numbers will likely be limited as investors focus on Friday’s Bundesrat vote.

Daniel Kral, European macro specialist at Oxford Economics, commented on recent policy shifts:

“Big demand-side policy announcements recently from Europe and Asia, the world’s foremost demand-deficient regions. Big fiscal loosening in Germany and measures to boost consumption in China. A lot depends on implementation, but both may rebalance global trade more than tariffs.”

US Market Recap: US Rally on Dovish Fed Optimism

US equity markets rallied on Wednesday, March 19, as the FOMC Economic Projections signaled multiple Fed rate cuts. The Nasdaq Composite Index jumped 1.41%, the S&P 500 advanced 1.08%, and the Dow climbed 0.92%.

10-year US Treasury yields ended the Wednesday session lower on the Fed’s policy outlook.

The Fed left interest rates at 4.5% on March 19, shifting market focus to the crucial FOMC Economic Projections. Fed revisions to its 2025 projections included:

• GDP growth dropped from 2.1% to 1.7%.
• The unemployment rate increased from 4.3% to 4.4%.
• PCE inflation rose from 2.5% to 2.7%.
• Fed interest rate forecast unchanged at 3.9%.

US Jobless Claims in Focus

On March 20, US labor market will influence risk sentiment. Economists forecast initial jobless claims to rise from 220k (week ending March 8) to 224k (week ending March 15).

• A larger-than-expected increase may boost expectations for a June Fed rate cut, potentially fueling demand for German stocks. A softer labor market may weaken wage growth, dampening consumer spending and inflationary pressures.
• A stronger labor market could temper bets on an H1 2025 Fed rate cut, weighing on rate-sensitive DAX stocks.

Other key data releases include the Philly Fed Manufacturing Index and existing home sales data. However, these will likely play second fiddle to the labor market data.

Beyond economic data, traders should monitor tariff developments, potentially influencing market risk appetite.

Near-Term Outlook

The DAX’s trajectory will depend on central bank policies, tariff developments, and fiscal policy decisions:

• Bearish Scenario: Rising US-EU trade tensions, a Bundesrat vote against fiscal reforms, and a hawkish ECB could push the DAX below 23,000.
• Bullish Scenario: A dovish ECB stance, easing trade tensions, and parliamentary approval of fiscal reforms could drive the DAX past its record high of 23,476.

As of Thursday morning, US futures pointed to an upbeat US session, with the Nasdaq 100 mini up 130 points.

DAX Technical Indicators

Daily Chart

Despite Wednesday’s pullback, the DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs), signaling strong bullish momentum. However, fiscal and tariff-driven volatility raises short-term downside risks.

If the DAX breaks out above 23,350, the bulls may target the record high of 23,476. A return to 23,476 could indicate a move toward 23,750.

Conversely, a DAX fall to 23,000 could bring 22,750 into sight. A break below 22,750 may enable the bears to target 22,500.

The 14-day Relative Strength Index (RSI) at 59.88 indicates the DAX may climb to the March 6 record high of 23,476 before entering overbought territory (RSI > 70).

Final Thoughts

Key market forces influencing the DAX outlook include:

• US-EU trade relations and potential tariff escalations.
• ECB policy direction and rate guidance.
• Germany’s fiscal reform vote and its impact on economic growth.
• US labor market data, influencing Fed rate expectations.

With elevated market volatility, traders should closely monitor policy shifts and technical signals for trading opportunities. View our latest reports here.