DAX Index News: ECB, Fed Rate Speculation Fuels 10-Day DAX Rally – What’s Next?

Market Overview

On Monday, August 19, the DAX advanced by 0.54%, following the previous day’s 0.77% gain, closing at 18,322. Significantly, the DAX extended its winning streak to ten sessions.

Monday: DAX Market Movers

• Zalando SE topped the table, rallying 3.02% on sentiment toward ECB and Fed rate cuts.
• Auto stocks extended their gains from Friday, with BMW and Volkswagen rising by 1.20% and 1.09%, respectively. Mercedes-Benz Group gained 1.02%. Easing fears of a US recession and expectations of multiple Fed rate cuts bolstered the demand outlook for autos.

German Producer Prices

On Tuesday, August 20, German producer prices will draw investor interest. Economists forecast producer prices to fall by 0.8% year-on-year in July, following a decline of 1.6% in June.

Producers increase prices in a rising demand environment, passing costs onto consumers. However, a continued decline in producer prices, year-on-year, may have a limited effect on a September ECB rate cut.

Eurozone Inflation and Wage Growth Trends

Wage growth and finalized inflation figures for the Eurozone may influence the ECB rate path.

The annual inflation rate rose from 2.5% in June to 2.6% in July, according to the preliminary report. Additionally, economists expect wages to increase by 4.3% in Q2 2024, down from 4.69% in Q1 2024.

Higher-than-expected inflation and wage growth could reduce investor bets on a September rate cut. Falling bets on a September ECB rate may impact buyer demand for DAX-listed stocks.

US CB Leading Index Signals Multiple 2024 Fed Rate Cuts

On Monday, August 19, the US Conference Board Leading Economic Index (LEI) fell by 0.6% in July, following a decline of 0.2 in June.

The Conference Board Business Cycle Indicators Senior Manager, Zabinska-La Monica, remarked on the July numbers, stating,

“The LEI continues to fall on a month-over-month basis, but the six-month annual growth rate no longer signals recession ahead. The Conference Board expects US real GDP growth to slow over the next few quarters as consumers and businesses continue cutting spending and investments. US real GDP is expected to expand at a pace of 0.6 percent annualized in Q3 2024 and 1 percent annualized in Q4.”

Easing fears of a US economic recession, coupled with speculation of multiple 2024 Fed rate cuts, drove buyer demand for riskier assets.

US Market Trends

On Monday, August 19, the US equity markets started the week on a positive footing. The Nasdaq Composite Index rallied 1.39%, extending its winning streak to eight sessions. The S&P 500 and the Dow saw gains of 0.97% and 0.58%, respectively.

US Economic Calendar

On Tuesday, August 20, investors should monitor FOMC member commentary. Views on the economic outlook, the labor market, and the Fed rate path may influence buyer demand for DAX-listed stocks.

Expert Views on the US economy

Arch Capital Global Chief Economist Parker Ross remarked on the New York Fed’s latest Labor Market Survey, stating,

“Key Takeaway: There is growing concern about job loss and a corresponding decline in workers expecting to move to a new employer, particularly among workers aged 45 and under. The results of this survey are yet another reflection of how concerned consumers are about the labor market, even as the Fed has only recently declared it “balanced.”

Weaker US labor market conditions could dampen investor hopes of a soft landing. Higher unemployment may impact wage growth and disposable income, possibly reducing consumer spending – a key driver of the US economy.

Near-Term Outlook

Near-term DAX trends will hinge on central bank commentary and Thursday’s Services PMI numbers. Softer Services PMI numbers and support for September rate cuts could fuel buyer demand for DAX-listed stocks. However, a drop in the US Services PMI below 50 could reignite investor fears of a US recession, possibly overshadowing rate cut optimism and affecting riskier assets.

In the futures markets, the DAX and the Nasdaq Mini were up by 8 and 28 points, respectively.

Investors should stay alert with the ECB and the Fed in focus. 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 held above the 50-day and 200-day EMAs, confirming the bullish price trends.

A breakout from 18,500 could give the bulls a run at 18,750. A return to 18,750 may support a move toward the all-time high of 18,893.

German producer prices, Eurozone inflation, and central bank chatter require consideration.

Conversely, a DAX break below the 50-day EMA could bring 18,000 into view. A fall through 18,000 could give the bears a run at the 17,615 support level.

The 14-day RSI at 56.84 indicates a move to the all-time high of 18,893 before entering overbought territory.