The DAX tumbled at the open on Thursday, April 3, sliding 2.44% to 21,845. Investors responded to Trump’s overnight tariff announcements, which triggered a flight to safety.
On Wednesday, April 2, President Trump announced a new wave of tariffs, rattling markets. While China, Taiwan, and South Korea bore the brunt of Trump’s tariff hikes, the EU did not go unscathed, with tariffs on EU goods raised by 20%.
World leaders condemned Trump’s tariffs, warning of retaliatory measures if talks fail. European Commission President Ursula von der Leyen reportedly stated:
“We are already finalising the first package of countermeasures in response to tariffs on steel. And we’re now preparing for further countermeasures to protect our interests and our businesses if negotiations fail.”
Trump’s 20% tariff sent German-listed auto stocks into a tailspin. Porsche led the losses, tumbling 2.70%. BMW, Mercedes-Benz Group, and Volkswagen also posted heavy losses.
Tech stocks succumbed to the tariff news, with Infineon Technologies falling 3.89%, However, German banks suffered the heaviest losses amid fears of a trade war impacting the global economy. Commerzbank and Deutsche Bank plunged 5.52% and 5.82%, respectively.
With markets digesting the tariff shock, investor focus will turn to the ECB’s monetary policy meeting minutes. The meeting minutes should draw more interest as investors weigh the combined impact of softer inflation and elevated tariffs.
While EU retaliatory measures and a possible US response could sour risk sentiment, any ECB hints of additional policy support may cushion downside pressure. A weaker EUR/USD could also boost export competitiveness, potentially offsetting some of the tariff impact.
US equity markets advanced on Wednesday, April 2, ahead of Trump’s Liberation Day tariff announcements after the market close. The Nasdaq Composite Index gained 0.87%, while the Dow and the S&P 500 rose 0.56% and 0.67%, respectively. However, Trump’s tariff hikes triggered a flight to safety, sinking US futures. Dow Jones Futures plunged 917 points, while the Nasdaq 100 Futures tumbled 665 points ahead of the European opening bell.
Later, in the US session, labor market and services sector economic indicators require consideration amid shifting sentiment toward the US economy.
Economists forecast initial jobless claims to rise to 225k (week ending March 29), up from 224k (week ending March 22). An unexpected spike above 250k could fuel recessionary fears, raising the chances of multiple 2025 Fed rate cuts. However, a drop below 220k could signal a more hawkish Fed stance.
Economists forecast the ISM Services PMI to slip to 53.0 in March, down from 53.5 in February. A larger-than-expected fall below the neutral 50 level could potentially spook investors grappling with recessionary fears. Beyond the headline PMI, investors should consider price and employment trends. Softer prices and job creation rates could signal weaker inflation, supporting a more dovish Fed stance.
Conversely, a higher PMI reading and rising employment and prices could support a more hawkish Fed rate path.
Tariff developments and FOMC commentary will also remain key influences. An escalating trade dispute could deepen losses for German exporters, while any easing in rhetoric may provide the DAX with some relief.
The DAX’s path will depend on central bank policies, economic data, and trade headlines:
The DAX opened below the 50-day Exponential Moving Average (EMA) on Thursday but remained above the 200-day EMA. The EMAs suggest bearish near-term momentum, though the longer-term trend remains intact above the 200-day level.
A breakout above 22,000 could support a move back to the 50-day EMA. A sustained move through the 50-day EMA may enable the bulls to target 22,500.
Conversely, a DAX drop to 21,750 could indicate a fall toward 21,500, opening the door to 21,000.
The 14-day Relative Strength Index (RSI) at 39.54 suggests the DAX could fall toward 21,500 before entering oversold territory (RSI< 30).
Key market forces influencing the DAX outlook include:
With volatility spiking, traders should closely monitor macro data, central bank updates, and technical signals here.
With over 28 years of experience in the financial industry, Bob has worked with various global rating agencies and multinational banks. Currently he is covering currencies, commodities, alternative asset classes and global equities, focusing mostly on European and Asian markets.