DAX Index News: DAX Faces Volatility Amid Rate Cut Bets and Economic Uncertainty

Market Overview

On Tuesday, August 27, the DAX gained 0.35%, reversing a 0.09% loss from the previous day, closing at 18,682.

Key DAX Market Movers on Friday

Continental led the DAX, rallying 2.74%, with Adidas advancing by 2.19%.

Risk-on sentiment also fueled demand for tech stocks, with Infineon Technologies and SAP advancing by 0.78% and 0.55%, respectively.

However, the auto sector had a mixed session. Daimler Truck Holding slid by 1.19%, while Mercedes Benz Group gained 0.40%.

German Consumer Sentiment Tumbles

The German GfK Consumer Climate Index forecast unexpectedly fell from -18.6 for August to -22.0 for September.

Income and economic expectations, and the willingness to buy, fell sharply in August, signaling a gloomy end to Q3 2024. The latest survey could boost the chances of a September ECB rate cut.

NIM Consumer Expert Rolf Buerkl commented on the latest figures, stating,

“Apparently, the euphoria of German consumers triggered by the European Football Championship was only a brief flare-up and faded after the end of the tournament. In addition, negative news about job security is making consumers more pessimistic and a fast recovery in consumer sentiment seems unlikely.”

German Economy Contracts in Q2 2024

The German economy contracted by 0.1% in Q2 2024 after expanding by 0.2% in Q1 2024, confirming the flash report from July 30. Economic indicators for Q3 2024 suggest more pain ahead, though the effects of Euro 2024 could provide some cushioning.

Expert Views on the German Labor Market and ECB Rate Path

Oxford Economics Chief German Economist and ECB Commentator Oliver Rakau commented on the ECB’s focus on inflation, stating,

“What would Draghi do? Or maybe more correctly, what would Draghi have already done? Ifo employment intentions took another broad-based dive in August making a similar move in the EZ ESI data quite likely. IMO time for Lagarde to follow Powell’s lead and focus on the labour market.”

US Consumer Confidence Survey Signaled Labor Market Jitters

The CB Consumer Confidence Index increased from 101.9 in July to 103.3 in August, easing fears of a US recession. Notably, the Expectations Index increased from 81.1 to 82.5, moving away from 80, which generally signals a recession.

However, the survey revealed growing concerns about labor market conditions. Conference Board Chief Economist Dana M. Peterson commented,

“Consumers’ assessments of the current labor situation, while still positive, continued to weaken, and assessments of the labor market going forward were more pessimistic. This likely reflects the recent increase in unemployment. Consumers were also a bit less positive about future income.”

US Market Trends

On Tuesday, the Nasdaq Composite Index and the S&P 500 saw gains of 0.16% and 0.16%, respectively, while the Dow increased by 0.02%.

Investors were cautiously optimistic ahead of NVIDIA’s (NVDA) earnings report and Friday’s crucial US Personal Income and Outlays Report.

US Economic Calendar

Later in the Wednesday session, investors should track comments from the Fed. FOMC voting members Christopher Waller and Raphael Bostic are on the calendar to deliver speeches.

Concerns about the US labor market and support for a 50-basis point September Fed rate cut could retrigger US recession fears. Fears of a hard US landing may fuel a flight to safety. Confidence in a soft landing could boost demand for DAX-listed stocks.

Expert Views on the US Labor Market and Economic Outlook

Arch Capital Global Chief Economist Parker Ross commented on current unemployment levels and a US recession, stating,

“I keep hearing: we can’t have a recession with unemployment below 5%… Quick history lesson: the unemployment rate was at or below the current level (4.3%) right before half of the recessions since the late 1940s. It was at or below 5% right before 8 of those 12 recessions.”

Ross’s views on unemployment and recession prospects are important when considering the effect of recession risks on the DAX.

Near-Term Outlook

Friday’s inflation data from the Eurozone and the US Personal Income and Outlays Report will likely influence near-term DAX trends.

Softer inflation and a pullback in US personal spending may fuel speculation about possible September ECB and Fed rate cuts. Rising bets on September rate cuts could push the DAX toward 19,000. However, the DAX could drop below 18,000 if US recession fears resurface.

In the futures markets, the DAX and the Nasdaq Mini were down by 1 and 32 points, respectively.

Investors should stay alert, with central bank speakers and economic indicators likely to influence risk sentiment. Monitor the news wires, the economic calendar, and expert commentary to manage trading strategies.

Stay informed with our latest news and analysis to manage your risks effectively.

DAX Technical Indicators

Daily Chart

The DAX sat comfortably above the 50-day and 200-day EMAs, confirming the bullish price trend.

A breakout from 18,750 could signal a move toward the all-time high of 18,893. Furthermore, a return to 18,893 could give the bulls a run at 19,000.

Central bank commentary requires consideration as key economic indicators loom.

Conversely, a fall through 18,500 could bring the 50-day EMA into play. Furthermore, a drop below the 50-day EMA could signal a fall toward 18,000.

The 14-day RSI at 64.12 indicates a return to the all-time high of 18,893 before entering overbought territory.