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Dax Index News: Fed’s Rate Cut to Spark DAX Rally Despite ECB Inflation Concerns
By:
Key Points:
- DAX slips 0.08% as Eurozone inflation stays above target, raising uncertainty over ECB rate cut timing.
- Fed cuts rates by 50bps post-European market close, sparking optimism as US futures rise after the announcement.
- US labor market data in focus after Fed projections suggest a possible soft landing, impacting global stock movements.
In this article:
Market Overview
On Wednesday, September 18, the DAX slipped by 0.08%, partially reversing a 0.50% gain from the previous day to close at 18,712.
Key DAX Market Movers
Rate-sensitive Siemens Energy AG led the gains, rallying by 2.77% on expectations of a sizeable Fed rate cut after Wednesday’s closing bell.
BASF gained 2.37% on reports of plans to IPO its agri-chemical business.
Zalando SE extended its gains from Tuesday, climbing 1.51%. On Tuesday, Kingfisher raised the lower end of its annual profit forecast, boosting demand for retail stocks.
Auto stocks also extended their gains from Tuesday, with BMW and Porsche advancing by 2.19% and 0.99%, respectively.
Eurozone Inflation Eases But Remains Above Target
On Wednesday, finalized inflation figures for the Eurozone failed to raise bets on an October ECB rate cut. The annual inflation rate fell from 2.6% in July to 2.2% in August, aligned with the preliminary data. Notably, the inflation rate remained above the ECB’s 2.0% target, driving uncertainty about a Q4 2024 ECB rate cut.
Bundesbank President Joachim Nagel remarked on Eurozone inflation, reportedly stating,
“Inflation is currently not where we want it to be.”
ECB Commentary in Focus
On Thursday, September 19, investors should track comments from ECB policymakers.
ECB Executive Board Member Isabel Schnabel is on the calendar to speak. Her views on the timing of an ECB rate cut will influence demand for DAX-listed stocks. Support for an October ECB rate cut could boost the DAX.
The Fed Rate Cut and FOMC Projections
After Wednesday’s European market closing bell, the Fed cut interest rates by 50 basis points. While surprising the markets with a sizable rate cut, the Economic Projections offered relief. The Fed signaled a soft landing, with GDP forecasts for 2025 and 2026 unchanged from the June projection.
However, the Fed expects US labor market conditions to deteriorate more than in June, with the unemployment rate projected to reach 4.4% in 2024, up from the June projection of 4.0%. The September projections highlight the importance of upcoming US labor market data. Worse-than-expected trends could challenge the Fed’s GDP forecasts and Fed Funds Rate trajectory.
US Market Trends
On Wednesday, September 18, the US equity markets reacted to the FOMC interest rate decision, projections, and press conference. The Nasdaq Composite Index rose to a session high of 17,833 before hitting the reverse, ending the session down 0.31% as investors sold the news. The Dow and the S&P 500 saw declines of 0.25% and 0.29%, respectively.
US Economic Calendar
On Thursday, US labor market data will draw investor attention after the overnight FOMC projections.
Economists expect initial jobless claims to remain steady at 230k in the week ending September 14. A modest increase could support expectations of a soft US economic landing and a November Fed rate cut. A dovish Fed rate path and further signs of a soft US landing might further boost the DAX.
Conversely, an unexpected spike in jobless claims might retrigger fears of a hard landing, possibly pushing the DAX down toward 18,000.
Other stats include the Philly Fed Manufacturing Index and housing sector data. However, these will likely have less impact than the labor market data.
Near-Term Outlook
Near-term DAX trends will hinge on US labor market data and central bank commentary. Weaker US labor market data may fuel expectations for further Fed rate cuts, potentially increasing demand for DAX-listed stocks. However, investors should consider ECB comments on the timing of a Q4 rate cut. Calls to delay further rate cuts may affect buyer appetite for DAX-listed stocks.
In the futures markets, the DAX and the Nasdaq mini were up by 164 and 279 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 hovers above the 50-day and 200-day EMAs, sending bullish price signals.
A return to the 18,750 level could give the bulls a run at the all-time high at 18,991. Furthermore, a breakout from 18,991 might signal a move toward 19,200.
Central bank commentary and US labor market data require investor consideration.
Conversely, a fall through 18,500 would give the bears a run at the 50-day EMA. A drop below the 50-day EMA could signal a fall toward 18,000.
The 14-day RSI at 57.13 suggests a return to the all-time high before entering overbought territory.
About the Author
Bob Masonauthor
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.
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