Dax Index News: DAX Eyes Record Highs as Stimulus Offsets US Tariff Concerns

DAX Rallies on Fiscal Deal, Countering US Tariff Risks

The DAX just got a massive boost—Germany’s historic fiscal deal aims to fuel growth amid global trade tensions. The agreement is expected to secure a parliamentary vote in favor of a €500 billion infrastructure fund and a €100 billion climate and economic transformation fund. The two sides also agreed to exempt defense spending from the fiscal cap, effectively ending Germany’s conservative debt brake.

A surge in fiscal support could counter the potential impact of US tariffs on the German economy, boosting demand for risk assets. The Bundestag is set to vote on the proposals on Tuesday, March 18.

The DAX rallied 1.86% on Friday, March 14, reversing Thursday’s 0.48% loss to close at 22,987.

DAX Winners: Banks, Defense, and Aerospace Soar

The progress toward debt brake reforms and fiscal rules boosted banks, construction, and defense stocks.

Rheinmetall AG led the charge, soaring 6.29%, while Heidelberg Materials AG rallied 3.75%. Aerospace stocks Airbus and MTU Aero Engines posted gains of 4.30% and 3.01%, respectively.

Commerzbank and Deutsche Bank benefited from the prospect of fiscal stimulus, advancing 3.50% and 2.50%.

German Wholesale Prices in Focus

On Friday, March 14, wholesale prices signaled rising demand and inflationary pressures. Wholesale prices rose 1.6% year-on-year in February, up from 0.9% in January. Wholesalers raise prices as demand increases, passing costs on to customers. A higher inflation outlook could delay further ECB rate cuts.

Meanwhile, higher spending could prompt the ECB to raise interest rates.

Fred Ducrozet, Head of Macroeconomic Research at Pictet Wealth Management, commented:

“Holzmann says higher European spending could force the ECB to hike rates.”

On March 14, the EUR/USD rose 0.22% to close at $1.08751. The pair continued trending higher on Monday, March 17.

German Fiscal Policy Remains Key for DAX Trends

After Friday’s agreement, fiscal policy-related updates will continue influencing demand for German-listed stocks.

Germany’s Bund 10-year Yield will likely remain a gauge of fiscal policy sentiment. The 10-year German Bund yield closed the Friday session higher at 2.87%, lower than a session high of 2.936%.

US Michigan Consumer Sentiment Stumbles

On Friday, March 14, the Michigan Consumer Sentiment Index dropped from 67.4 in February to 57.9 in March. The sharp fall in sentiment could signal weakening consumer spending, potentially impacting the US economy.

However, the Michigan Inflation Expectations Index rose from 4.3% in February to 4.9% in March, raising uncertainty about the Fed rate path.

Dip Buyers Drive US Market Rebound

US equity markets rallied on Friday, March 14, as bargain hunters boosted demand for risk assets. Investors brushed aside ongoing tariff risks, Fed policy uncertainty, and recession jitters.

The Nasdaq Composite Index soared 2.61%, while the Dow and the S&P 500 surged 1.65% and 2.13%, respectively.

US Retail Sales to Influence Recession Bets

While Germany’s fiscal policy and tariff developments continue driving, US retail sales data require consideration on Monday, March 17. Economists expect retail sales to rise 0.7% month-on-month (MoM) in February after sliding 0.9% in January.

Given private consumption contributes over 60% to US GDP, a stronger-than-expected print could ease concerns over a recession, lifting demand risk assets. However, another decline may fuel economic uncertainty, potentially limiting DAX gains despite fiscal stimulus optimism.

Near-Term Outlook: Key Drivers

The DAX’s near-term outlook hinges on:

• German fiscal policy: Updates from Germany ahead of Tuesday’s vote.
• Trade tensions – US-EU and US-China trade developments.
• US retail sales – Trends in retail sales and sentiment toward the US economy.

Potential DAX Scenarios:

• Bullish Case: Easing trade tensions, fiscal stimulus, and dovish central bank policies could drive the DAX toward the record high of 23,476.
• Bearish Case: Fiscal stimulus resistance, escalating trade risks, or weak retail sales could drag the DAX toward 22,750.

As of Monday morning, the DAX futures were up 102 points, while the Nasdaq 100 mini dropped 115 points, signaling diverging economic trends.

DAX Technical Indicators

Daily Chart:

The DAX sits well above the 50-day and 200-day Exponential Moving Averages (EMAs), suggesting strong bullish momentum. However, tariff and fiscal-driven volatility introduces short-term downside risks.

A breakout above Friday’s high of 23,050 would support a move toward the all-time high of 23,476. A return to 23,476 may enable the bulls to target 23,750.

Conversely, if the DAX breaks below 22,750, it may test support at 22,500. A fall through 22,500 would bring 22,000 and the 50-day EMA into play.

With the RSI at 57.34, the DAX remains below overbought levels (above 70), signaling room for a climb to its all-time high of 23,476.

Conclusion: Key Drivers to Watch

Traders should monitor:

• Developments in German fiscal policy.
• ECB and Fed commentary.
• US-EU and US-China trade tensions.
• US retail sales data.

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