Dax Index News: Forecast Eyes German Ifo Data and US Fed Rate Path for Dax Outlook

DAX Ends Three-Day Losing Streak

On Thursday, October 24, the DAX advanced by 0.34%, recovering from a 0.23% loss in the previous session, closing at 19,443. The DAX ended its three-day losing streak.

Major Stock Movers: Auto Stocks Rally on Renault Earnings Beat

The auto sector took center stage on Thursday. Renault posted Q3 earnings results, beating estimates, which boosted demand for German auto stocks. Volkswagen rallied 2.13%, while Mercedes-Benz Group and BMW advanced by 1.44% and 1.22%, respectively.

Tech stocks continued climbing as SAP’s earnings results and outlook resonated with investors. Infineon Technologies rose by 0.92%, while SAP ended the session up by 0.18%.

However, Deutsche Bank slid by 2.41%, extending its losses from Wednesday. Investors continued responding to the bank increasing its bad loan projections, which could pressure net interest margins (NIM).

Eurozone Private Sector Contracts Again

On Thursday, Euro area private sector PMIs showed modest improvement but signaled a continued contraction. The Eurozone’s Composite PMI increased from 48.6 in September to 49.7 in October. Significantly, the crucial HCOB Services PMI unexpectedly fell from 51.4 to 51.2.

Despite the decline in the PMI, inflationary pressures across the service sector remained elevated. Services inflation trends dampened expectations for a 50-basis point December ECB rate cut, impacting demand for DAX-listed stocks.

Expert Views on Inflation and the ECB Rate Path

Hamburg Commercial Bank Chief Economist Dr. Cyrus de la Rubia assessed the PMI data, saying,

“For the European Central Bank (ECB), the latest figures come with an unwelcome surprise. Inflation in the services sector seems likely to stay elevated, as costs and selling prices in October rose faster than the previous month. This is probably due to persistent wage pressure, which impacts service providers especially hard.”

German Business Sentiment in Focus

On Friday, October 25, German Ifo Business Climate figures could give further insights into the German economy. Economists forecast the Ifo Business Climate Index to increase from 85.4 in September to 85.6 in October. Better-than-expected figures could support expectations of a pickup in business activity.

However, concerns about a potential Trump presidency and a potential EU-US trade war, alongside weak demand from China, could limit any positive influence on the DAX.

US Labor Market and Services PMI Signal Robust US Economy

On Thursday, US jobless claims and service sector PMI data boosted expectations for a soft US economic landing. Initial jobless claims fell from 242k (week ending October 12) to 227k (week ending October 19). A tighter labor market could support private consumption, which accounts for 60% of GDP.

The S&P Global Services PMI increased from 55.2 in September to 55.3 in October. Accounting for about 80% of the US economy, a jump in new orders raised expectations of a soft US economic landing.

However, softer service sector inflation boosted expectations for a December Fed rate cut.

US Equity Market Overview

US equity markets had a mixed Thursday session. The Nasdaq Composite Index and the S&P 500 saw gains of 0.76% and 0.21%, respectively, while the Dow declined by 0.33%.

Tesla (TSLA) led the Nasdaq higher, surging by 21.92% after beating earnings forecasts and delivering a positive growth forecast.

10-year US Treasury yields eased back from Wednesday’s 3-month high, offering modest support to riskier assets. Despite the pullback, yields remained elevated, which may continue to influence the appetite for riskier assets.

US Consumer Sentiment in Focus

Turning to Friday’s US session, finalized Michigan Consumer Sentiment figures may influence the Fed rate path. According to the preliminary report, the Michigan Consumer Sentiment Index fell from 70.1 in September to 69.0 in October. An upward revision could reduce bets on a December Fed rate cut and impact demand for DAX-listed stocks.

Beyond the headline figure, Michigan Inflation Expectations also need consideration. Rising inflation expectations could signal a pickup in consumer spending, fueling demand-driven inflation. A higher inflation outlook could also dampen expectations of a December Fed rate cut.

Falling bets on a December Fed rate cut could pull the DAX below 19,350. Conversely, weaker data and expectations of multiple Q4 2024 Fed rate cuts may push the DAX toward its all-time high of 19,667.

Near-Term Outlook

In the near term, trends will likely depend on corporate earnings, central bank commentary, and expectations for multiple ECB and FED rate cuts. Weaker economic indicators could boost bets on December ECB and Fed rate cuts. However, ECB and Fed commentary need to support more dovish rate paths to push the DAX toward its all-time high.

Futures indicate a testy start to the Friday session, with the DAX and Nasdaq mini futures down by 42 and 8 points, respectively.

Investors should stay vigilant, with corporate earnings, economic data, and central bank commentary in focus. Stay informed with our latest news and analysis to manage your risks effectively.

DAX Technical Indicators

Daily Chart

The DAX remains above the 50-day and 200-day EMAs, confirming bullish price trends.

A return to 19,500 could allow the bulls to test resistance at the October 17 all-time high of 19,675. Furthermore, a break above 19,675 may signal a move toward 19,750.

Investors should consider sentiment data, corporate earnings, and central bank speeches, which may influence near-term market sentiment.

Conversely, a fall through 19,350 could bring 19,000 and the 50-day EMA into play.

The 14-day RSI at 58.19 suggests a DAX climb to 19,750 before entering overbought territory.