Dax Index News: Fed Rate Uncertainty and Inflation Forecast Set DAX Outlook for October

Market Overview

On Monday, September 30, the DAX declined by 0.76%, partially reversing a 1.22% gain from Friday, closing at 19,325.

Auto Stocks Slide on Volkswagen and Stellantis Outlook Cuts

Auto stocks reversed their gains from Friday as investors reacted to Volkswagen lowering its 2024 outlook. Stellantis also cut its 2024 profit forecast, contributing to the broader sector’s losses.

Porsche and Mercedes Benz Group saw losses of 2.86% and 2.44%, respectively, while BMW declined by 2.42%. Volkswagen ended the session down 2.02%.

The chemical sector also faced losses, with BASF and Brenntag AG falling by 1.51% and 1.18%, respectively.

German Inflation Cools

On Monday, September 30, inflation figures from Germany boosted bets on an October ECB rate cut. The annual inflation rate fell from 1.9% in August to 1.6% in September, the lowest level since February 2021.

Expert Views on ECB Policy

Daniel Kral, Europe Macro Specialist at Oxford Economics, reacted to the inflation data, stating,

“With Germany and Italy’s September inflation out today, the stage is set for a large downside surprise to Eurozone inflation – looking like 1.6% (out tomorrow). An October rate cut by the ECB is increasingly likely, even if the large drop is driven by all except services (where the focus is).”

Eurozone Inflation in Focus

On Tuesday, October 1, inflation figures for the Eurozone will garner investor interest. Economists forecast the annual inflation rate to drop from 2.2% in August to 1.9% in September. A larger-than-expected decline could cement bets on an October ECB rate cut. Notably, the Eurozone inflation rate last sat within the ECB’s 2% target range in June 2021.

Rising bets on an October ECB rate cut could drive demand for rate-sensitive DAX-listed stocks.

Additionally, finalized manufacturing sector PMI numbers for Germany and the Eurozone are also due. However, unless there are marked revisions to the PMIs, the inflation figures will likely impact the DAX more.

Fed Chair Powell Tempers Aggressive Fed Rate Cut Bets

On Monday, Fed Chair Powell said the US labor market and economy were solid. Furthermore, the Fed Chair said that there was no urgency to aggressively cut interest rates. He stated that the Fed remains data-dependent.

The markets reacted to Powell’s comments. According to the CME FedWatch Tool, the chances of a 50-basis point November Fed rate cut fell from 53.3% (September 27) to 38.0% (September 30). The shift in sentiment toward the Fed rate path pared gains across the US equity markets.

US Market Trends

On Monday, September 30, the US equity markets ended the session in positive territory. The Nasdaq Composite Index and the S&P 500 advanced by 0.38% and 0.42%, respectively, while the Dow gained a modest 0.04%.

US Economic Calendar: Labor Market in Focus

On Tuesday, the US JOLTs Job Openings Report will also require consideration. Economists forecast job openings to fall from 7.673 million in July to 7.670 in August.

A larger-than-expected decline could raise expectations of a 50-basis point November Fed rate cut, supporting a DAX move toward 19,500. However, a drop below 7.500 million could retrigger fears of a hard US economic landing, which may drag the DAX below 19,000.

A weaker labor market may slow wage growth, possibly impacting consumer spending, which accounts for over 60% of US GDP.

Near-Term Outlook

Near-term DAX trends will likely depend on Eurozone inflation figures, US labor market data, and central bank commentary.

Lower-than-expected Eurozone inflation and US job openings could fuel speculation about multiple 2024 ECB and Fed rate cuts. More dovish ECB and Fed rate paths could push the DAX toward 19,500. However, the DAX could drop below 19,000 if US data signals a possible hard economic landing.

The futures markets signal a positive start to the Tuesday session, with the DAX and Nasdaq mini up by 44 and 13 points, respectively.

Investors should stay alert to central bank chatter and economic indicators. Stay informed with our latest news and analysis to manage your risks effectively.

DAX Technical Indicators

Daily Chart

The DAX sits comfortably above the 50-day and 200-day EMAs, affirming bullish price signals.

A return to Friday’s all-time high of 19,492 could give the bulls a run at 19,650. Furthermore, a break above 19,650 may indicate a move toward the 19,750 level.

Investors should focus on Eurozone inflation numbers, US labor market data, and central bank commentary, which may influence near-term market sentiment.

Conversely, a break below 19,250 could bring the 19,000 level into play. A fall through 19,000 may give the bears a run at the 18,750 level.

The 14-day RSI at 64.02 suggests a move to 19,500 before entering overbought territory.