Dax Index News: Can Dovish ECB Policy and Weaker EUR Offset US Headwinds?

DAX Kickstarts 2025 with Gains: Is a New High on the Horizon?

On Thursday, January 2, the DAX advanced by 0.58%, reversing a 0.38% loss from December 30, closing at 20,025. Despite the gains, US tariff threats and a hawkish Fed rate path remained headwinds.

Sector Performance: Autos Slide Amid Trump Tariff Threats

Auto stocks started 2025 on the back foot amid rising fears of US tariffs on EU goods. Markets expect Germany’s auto sector to suffer from potential tariffs. Volkswagen slid by 1.89%, while Mercedes-Benz Group and BMW posted losses of 1.71% and 1.11%, respectively.

Bank stocks were also under pressure. US banking sector deregulation could make European banks less competitive, potentially impacting earnings. Deutsche Bank and Commerzbank ended the session in negative territory.

In contrast, Airbus rallied 3.72%, with insurance stock Hannover Re and Munich Re contributing to Thursday’s gains.

Beijing’s Policy Pledges Counter Weak PMI Data

China’s Caixin Manufacturing PMI fell from 51.5 in November to 50.5 in December, revealing weakening demand. However, President Xi Jinping reiterated the government’s pledge to boost domestic demand and consumption, limiting the impact of the PMI data.

German Manufacturing Sector Woes Bolster ECB Rate Cut Bets

Germany’s HCOB Manufacturing PMI dropped to 42.0 in December, down from 43.0 in November. The PMI survey highlighted weak domestic and overseas demand and further job cuts. Price trends also reflected subdued demand while supporting a more dovish ECB rate path.

The EUR/USD tumbled 0.91% on Thursday, closing at $1.02610. A softer EUR could counter the effects of US tariffs and make German goods more price-competitive.

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented:

“The manufacturing slump is widespread across different sectors. Intermediate goods took the biggest hit in December, with the corresponding PMI dropping like a rock to the lowest level of the year. Things are not looking much better for the investment goods sector either, as its PMI has been stuck in recessionary territory all year long. Given that both of these sectors are heavily exposed to tariffs threatened by the US, it’s hard to imagine a sustainable recovery in the coming quarters.”

German Unemployment and the ECB Rate Path in Focus

On Friday, January 3, German unemployment data will draw interest. Economists expect the unemployment rate to increase from 6.1% in November to 6.2% in December.

A weaker labor market may curb wage growth, potentially dampening consumer spending and inflationary pressures. A softer inflation outlook would support a move dovish ECB rate path. Lower borrowing costs and a weaker EUR could boost company earnings and stock prices.

US Jobless Claims Align with Hawkish Fed Rate Path Outlook

US initial jobless claims unexpectedly fell to 211k (week ending December 28), down from 219k (week ending December 21). Tighter labor market conditions support wage growth, fueling consumption and inflationary pressures. Rising inflation would align with the Fed’s economic projections and a more hawkish Fed rate path.

The potential for fewer 2025 Fed rate cuts and US tariffs remain headwinds for DAX-listed stocks.

US Markets Post New Year Losses: What’s Next?

US equity markets started 2025 with losses. The Nasdaq Composite Index declined by 0.16%, while the S&P 500 and the Dow dropped by 0.22% and 0.36%, respectively.

Concerns about the effects of Trump’s policies on inflation and the Fed rate path weighed on market sentiment.

Meanwhile, 10-year US Treasury yields trended higher, adding pressure on US equity markets.

US Manufacturing in Focus

In Friday’s US session, the ISM Manufacturing PMI will give insights into the demand environment. Economists expect the ISM Manufacturing PMI to remain at 48.4 in December. An unexpected fall could signal weakening demand. A pullback in demand and US tariff threats could weigh on export-focused DAX-listed stocks.

Conversely, a PMI move above the neutral 50 level could drive the DAX higher on improving demand.

Near-Term Outlook

The DAX will hinge on US data, tariff developments, and the ECB rate path. Better-than-expected US data and dovish ECB commentary could push the DAX toward its record high of 20,523. However, tariff threats and weaker US PMI data may drag the DAX toward 19,750.

As of Friday morning, futures pointed to a mixed Friday session. DAX futures were down 19 points, while the Nasdaq-mini futures gained 44 points.

DAX Technical Indicators

Daily Chart

Following Thursday’s gains, the DAX remains above the 50-day and 200-day EMAs, sending bullish price signals.

If the DAX returns to 20,350, the bulls could target the record high of 20,523 next. A break above 20,523 could signal a move toward 21,000.

China’s stimulus-related news, tariff-related chatter, US economic indicators, and central bank commentary will influence DAX trends.

Conversely, a DAX drop below 19,750 would bring the 50-day EMA and the 19,675 support level into play. However, buying pressure may intensify at the 19,657 support level. The 50-day EMA is confluent with it.

With the 14-day RSI at 54.06, the DAX could climb to its 20,523 record high before entering overbought territory (RSI higher than 70).

Final Thoughts

The DAX’s trajectory depends on US economic data, tariff developments, and ECB policy signals. While global uncertainties persist, a weaker EUR and dovish ECB policies could offset external pressures.

Read our detailed analysis of how global market dynamics influence the DAX’s performance here.