Dax Index News: DAX Eyes PMI Data for ECB Rate Clues Amid Global Market Pressure

DAX Extends Losing Streak to Three Sessions

On Wednesday, October 23, the DAX declined by 0.23%, following a 0.20% loss from the previous session, closing at 19,378. The DAX extended its losing streak to three consecutive sessions.

Rising US Treasuries, uncertainty about the US Presidential Election, and global demand jitters impacted demand for DAX-listed stocks.

Major Stock Movers: Earnings in Focus

On Wednesday, Deutsche Bank declined by 0.86% after the banking giant raised its bad loan projections. Rising bad loan can impact the bank’s funding costs, affecting net interest margins (NIM).

Retail stocks Zalando SE and Adidas saw losses of 2.64% and 1.86%, respectively. L’Oreal attributed weak demand from China to missing third-quarter sales projections, impacting retail stocks.

However, Infineon Technologies and SAP rallied 2.29% and 1.58%, respectively, after SAP raised its revenue outlook on Tuesday.

Eurozone Consumer Confidence Edges Higher

On Wednesday, the Eurozone Consumer Confidence Index climbed from -12.9 in September to -12.5 in October. The modest increase provided little relief to investors as economic indicators continued signaling weaker demand.

Despite sentiment toward demand, ECB policymakers remained divided on the ECB’s interest rate path. ECB President Lagarde remarked on the inflation outlook, stating,

“I think we are all confident that 2025 is the year when we reach our target, on a sustainable basis, and with the medium-term caveat that I have mentioned. But we have to be attentive to everything. […] And we have to pay attention to domestic inflation. That is the segment of inflation that is proving resistant.”

ECB Rate Path Under Scrutiny

Concerns about the euro area economy lingered ahead of Thursday’s crucial private sector PMI figures.

Frederik Ducrozet, Head of Macroeconomic Research at Pictet Wealth Management, shared a message from ECB staff, stating,

“ECB staff has a message for ECB Governing Council. However, the more active the policy response and the larger the real interest rate increase, the more the recessionary effects are exacerbated.”

Euro Area Private Sector PMIs in Focus

On Thursday, October 24, Euro area private sector PMIs will require consideration. Economists expect the crucial Eurozone HCOB Services PMI to increase from 51.4 in September to 51.5 in October. A larger-than-expected increase may temper investor bets on multiple ECB rate cuts through Q1 2025, potentially impacting demand for DAX-listed stocks.

Employment and price trends will play a key role in determining the ECB’s rate path, given that the services sector is a major driver of inflation.

An unexpected fall in the PMI could raise bets on multiple ECB rate cuts, potentially pushing the DAX toward 19,500. Conversely, higher prices and job creation could drag the DAX below 19,250.

US Equity Market Overview

On Wednesday, US equity markets ended the session in the red, with the Nasdaq Composite Index sliding by 1.60%. The Dow and the S&P 500 also saw losses, falling 0.96% and 0.92%, respectively.

10-year US Treasury yields climbed higher, weighing on riskier assets. Concerns about a Trump victory in the upcoming US Presidential Election and easing bets on a December Fed rate cut pushed yields upwards. Markets expect a Trump presidency to drive inflation, potentially forcing the Fed into a more hawkish interest rate trajectory. Potential trade wars remained another consideration.

US Labor Market and Services in Focus

Turning to Thursday’s US session, initial jobless claims and US Services sector PMI data will likely impact demand for riskier assets.

Economists expect initial jobless claims to increase slightly from 241k (week ending October 12) to 242k (week ending October 19). A sharp fall in claims could temper bets on a December Fed rate cut.

Additionally, economists forecast the S&P Global Services PMI to remain at 52.4 in October. A pickup in service sector activity may further reduce bets on a December Fed rate cut as it contributes about 80% to US GDP. However, investors should consider subcomponents, including prices, as the services sector remains the main contributor to inflation.

Better-than-expected labor market and services sector data could pull the DAX toward 19,250. Conversely, weaker numbers may boost bets on a December Fed rate cut, potentially driving the DAX toward 19,500.

Near-Term Outlook

In the near term, trends will likely depend on economic data, especially service sector PMIs and central bank commentary. Weaker services sector PMI data could boost expectations of multiple ECB and Fed rate cuts. However, ECB and Fed commentary remains crucial amid divided views on their respective rate paths.

Beyond the economic calendar, corporate earnings will also influence risk sentiment.

Futures indicate a mixed start to the Thursday session, with the DAX futures down 12 points while the Nasdaq mini futures gained 97 points. Losses across the Asian equity markets will likely set the tone for the European session as concerns about China’s economy lingered.

Investors should stay vigilant, with corporate earnings, Services PMIs, and central bank commentary in focus. Stay informed with our latest news and analysis to manage your risks effectively.

DAX Technical Indicators

Daily Chart

Despite three consecutive sessions in the red, the DAX sits above the 50-day and 200-day EMAs, affirming bullish price signals.

A break above 19,500 could support a move toward the October 17 all-time high of 19,675. Furthermore, a breakout from 19,675 may bring 19,750 into play.

Investors should consider service sector PMIs, corporate earnings, and central bank speeches, which may influence near-term market sentiment.

Conversely, a drop below 19,350 could give the bears a run at 19,000 and the 50-day EMA.

The 14-day RSI at 56.26 indicates a DAX move to 19,750 before entering overbought territory.