Dax Index News: ECB Signals in Focus as DAX Nears Key 22,000 Level

DAX Opens Higher as the ECB Interest Rate Decision Looms

The DAX Index opened higher on Thursday, January 30, advancing by 0.13% to 21,666 as investors shifted focus to the ECB. Market expectations of a potential ECB rate cut and a dovish policy outlook have fueled demand for German-listed stocks.

While Fed Chair Powell’s optimism toward the US economy is a tailwind, possible US tariffs on EU goods, as early as February 1, pose a risk.

Eurozone Economic Outlook and ECB Policy

A less dovish ECB policy outlook and US tariffs could weigh on demand for German-listed stocks. Recent Euro area PMI data may prompt the ECB to take a more cautious approach to forward guidance.

Daniel Kral, a European macro specialist at Oxford Dynamics, reviewed January’s Euro Area PMI data, saying:

“Habemus growthus in Eurozone and Germany! January composite PMIs edged up to just over 50 due to an improvement in manufacturing (still in recession) and also services (Germany). But details were not flattering, still weak demand, softening labour market and rising input costs…”

Sector Performance: Auto Stocks Struggle Amid Tariff Jitters

Auto stocks capped the early gains on January 30. BMW and Mercedes-Benz Group declined by 0.25% and 0.09%, while Volkswagen opened down 0.21%. Uncertainty about US tariffs weighed on the sector, a likely target if the US imposes import duties on EU goods.

Meanwhile, Siemens Energy rallied 2.35% following the upbeat preliminary Q1 revenue numbers.

Key Economic Data to Watch

German and Eurozone GDP figures on January 30 will draw interest. Economists expect Germany’s economy to contract by 0.1% in Q4 2024 after expanding by 0.1% in Q3 2024. For the broader Eurozone, economists predict growth to slow to 0.1% from 0.4% in the previous quarter.

Weaker-than-expected numbers could fuel market bets on multiple ECB rate cuts, boosting demand for German-listed stocks. Lower borrowing costs could support company earnings and valuations.

While the GDP numbers will influence market sentiment, the ECB interest rate decision and press conference will be the main events.

Economists expect the ECB to cut rates by 25 basis points to 2.9%. ECB President Christine Lagarde’s press conference could be crucial for the DAX. Support for further rate cuts on inflation optimism and bolstering the Eurozone economy could drive the DAX to record highs. Conversely, calls for caution amid rising prices across the private sector could pressure rate-sensitive stocks.

US Markets Highlights

On January 29, US equity markets reversed some of Tuesday’s gains amid potential restrictions on US AI-related exports. Waning expectations for an H1 2025 Fed rate cut added to the negative sentiment.

The Nasdaq Composite Index declined by 0.51%, while the Dow and S&P 500 dropped by 0.31% and 0.47%, respectively. Key market movers included Nvidia (NVDA), which slid by 4.10% as AI-related developments affected investor sentiment.

Fed Chair Powell called for real progress on inflation before considering further monetary policy easing. The Fed Chair also reinforced the Fed’s independence, dismissing Trump’s call for rate cuts.

The market reaction to Powell’s comments was swift. According to the CME FedWatch Tool, the chances of the Fed keeping rates unchanged in March jumped to 83.0%, up from 68.5% on January 28.

US Labor Market and Policy Risks

Looking ahead to Thursday’s US session, economists expect initial jobless claims to fall from 223k (week ending January 18) to 220k (week ending January 25).

A larger-than-expected fall would support Fed Chair Powell’s argument for keeping rates higher for longer. Conversely, an unexpected rise in claims could retrigger bets on an H1 2025 Fed rate cut.

Investors should also track Trump’s policy announcements as US tariff risks remain elevated.

Near-Term Outlook

The DAX’s trajectory hinges on the ECB interest rate decision, the press conference, and US tariff developments.

• A dovish outlook and easing tariff threats could push the DAX toward 22,000.
• A less dovish ECB policy outlook or threats of sweeping US tariffs could pull the DAX toward 21,000.

As of Thursday morning, futures pointed to a positive session. The Nasdaq 100 mini gained 113 points.

DAX Technical Indicators

Daily Chart

Following Wednesday’s record high, the DAX sits well above the 50-day and 200-day Exponential Moving Averages (EMAs), confirming bullish price trends.

If the DAX breaks Thursday morning’s record high of 21,677, the Index could climb to 21,750 next. A break above 21,750 may signal a move toward 22,000.

Conversely, a DAX break below 21,500 could enable the bears to target 21,350. A fall through 21,350 may bring 21,000 into sight.

With the 14-day Relative Strength Index (RSI) at 78.77, the DAX continues sitting in overbought territory (RSI higher than 70). Selling pressure could intensify at the record high of 21,677 due to overbought conditions reflected by the RSI.

Final Thoughts

The DAX faces potential volatility as investors consider the ECB’s monetary policy stance and US tariff risks. The ECB press conference and any trade-related developments will be critical in influencing market direction.

For more updates on DAX movements, US policy risks, and central bank decisions, stay tuned to our latest analysis here.