Dax Index News: Can the DAX Hold Gains After ECB Rate Cut and Trade Policy Shifts?

DAX Rallies as ECB Cuts Rates, Trump Shifts Tariff Policy

President Trump softened his stance on tariff policies, easing fears of a full-blown US-EU trade war. Meanwhile, an ECB rate cut, Germany’s progress toward an infrastructure fund, and an exemption from defense spending on fiscal limits also boosted demand for German-listed stocks.

On Thursday, March 6, the DAX gained 1.47%, adding to Wednesday’s 3.38% rally to close at 23,420. Significantly, the DAX briefly climbed to a record high of 23,476 before easing back.

Sector Highlights: Auto Stocks Shine on Softer Tariff Stance

DHL Group led the DAX, soaring 14.19% after reporting better-than-expected earnings.

Meanwhile, auto stocks dominated the top gainers. President Trump exempted 25% tariffs on automakers complying with the United States-Mexico-Canada Agreement (USMCA), boosting demand for auto stocks.

Continental AG and Daimler Truck Holding AG jumped 6.74% and 6.20%, respectively, while Mercedes-Benz Group, BMW, Volkswagen, and Porsche also posted solid gains.

ECB Cuts Interest Rates But Signals an April Pause

On March 6, the ECB cut interest rates by 25 basis points to 2.65%, in line with market expectations. Notably, ECB staff lowered the 2025 growth forecast to 0.9%, citing trade uncertainty. ECB President Christine Lagarde highlighted the risks, stating:

“Some people have used the adjective ‘phenomenal’ uncertainty and we debated as to whether it was high and rising, but suffice to say that it is all over – so we have risks all over, uncertainty all over.”

On future policy direction, Lagarde remained cautious:

“So that’s really where we are – not pre-committing, being data-dependent as ever, and deciding on a meeting-by-meeting basis.”

Germany’s Fiscal Policy Takes Center Stage Over Economic Data

On March 7, economists forecast German factory orders to slide 2.8% in January after surging 6.9% in December. While a larger slide in orders typically signals weakening demand, progress toward an infrastructure fund and changes in defense spending-related fiscal rules remain the key drivers.

Fiscal stimulus targeting defense and infrastructure could boost the broader German economy, supporting the DAX’s record-breaking rally.

Meanwhile, Eurozone Q4 GDP data is unlikely to impact market sentiment, as investors remain fixated on tariff developments and fiscal policy shifts.

US Labor Market Data: Mixed Signals for the Fed

On March 6, US labor market data sent mixed signals.

• Initial jobless claims fell to 221k (week ending March 1), down from 242k (week ending February 22).
• However, insured persons claiming benefits jumped 3.2% to 2.23 million in the week, fueling labor market concerns.

However, the Challenger Gray Report had a greater impact on risk sentiment. Nick Timiraos, Wall Street Journal Chief Economics Correspondent, commented:

“Challenger Gray report: U.S.-based employers announced 172,017 job cuts in February, the highest total for the month since 2009 and the highest monthly total since July 2020 when 262,649 cuts were announced.”

US Stocks Drop as Tariff and Economic Fears Weigh

On March 6, US equity markets tumbled amid tariff uncertainties and US economic jitters. The Nasdaq Composite Index slid by 2.61%, while the Dow and the S&P 500 posted losses of 0.99% and 1.78%, respectively.

Rising odds of a US economic recession signaled a shift in sentiment amid Trump’s tariff flip-flopping. According to Kalshi, the odds of a 2025 US recession stood at 39%, up from 17% in January.

Key Economic Data Ahead: The US Jobs Report to Influence Fed Rate Cut Bets

On March 7, the US Jobs Report will impact Fed rate cut bets, sentiment toward the US economy, and risk appetite.

• Economists expect the US unemployment rate to remain at 4% in February and wage growth to rise 4.1% year-on-year, matching January’s rise.
• Economists forecast a 160k increase in nonfarm payrolls, up from 143k in January.

Lower unemployment, rising wages, and higher nonfarm payrolls may sink June Fed rate cut bets. A more hawkish Fed rate path may test demand for risk assets. Higher borrowing costs could dampen corporate earnings. Conversely, softer labor market data could boost expectations of a June Fed policy move, potentially driving demand for risk assets.

Near-Term Outlook

The DAX’s near-term trends hinge on:

• German fiscal policy: Progress on fiscal rule changes and an infrastructure fund.
• Trade tensions – Escalating US-EU and US-China trade disputes pose downside risks.
• US Jobs Report – Labor market data will influence Fed policy expectations and DAX price trends.

If fiscal stimulus, easing trade tensions, and dovish central bank signals align, the DAX could rally toward 24,000. However, policy roadblocks, escalating trade risks, and a hawkish Fed may push the index back toward 23,000.

As of Friday morning, the DAX futures were down 229 points, while the Nasdaq 100 mini gained 89 points, signaling a choppy Friday session.

DAX Technical Indicators

Daily Chart:

After Thursday’s gains, the DAX sits well above the 50-day and 200-day Exponential Moving Averages (EMAs). However, tariff-fueled volatility suggests potential short-term downside risks within the broader uptrend.

A break above Thursday’s record high of 23,476 could signal a move toward 23,750. From there, a break above 23,750 may enable the bulls to target 24,000.

Conversely, if the DAX breaks below 23,350, sub-23,000 levels would likely come into play.

With the RSI at 65.98, the DAX remains below overbought levels (above 70), suggesting room for a move toward the 23,476 high.

Conclusion: Key Drivers to Watch

Traders should closely monitor:

• German fiscal policy updates.
• US Jobs Report.
• ECB and Fed commentary.
• US-EU and US-China trade tensions.

Further detailed analysis of global market influences on the DAX is available here.