Dax Index News: Hawkish Fed and China Policy – Analysis of DAX’s Next Move

DAX Ends Seven-Day Losing Streak – What’s Next?

The DAX snapped a seven-day losing streak on Friday, December 27, gaining 0.68% to close at 19,984. However, US tariff jitters and a hawkish Fed remained potential headwinds.

Sector Performance: Autos and Banks Lead Gains Amid Trump Policy Concerns

Investors brushed aside the threat of US tariffs, potentially targeting the EU’s auto sector. Porsche rallied 2.59%, while Volkswagen and BMW posted gains of 1.86% and 1.82%, respectively. Dip buyers likely fueled the rally amid thin holiday trading.

Bank stocks also trended higher, with Commerzbank and Deutsche Bank rising 1.70% and 1.35%, respectively. In recent sessions, concerns about US deregulation, potentially giving US banks a more competitive edge, had weighed on bank stocks.

China Growth Forecasts Offer Optimism

The World Bank raised its 2024 growth forecast from 4.8% to 4.9% while projecting 4.5% growth in 2025, up from 4.1% in June.

The Bank attributed the revisions to near-term trade terms and fiscal policy measures. However, the Bank also highlighted persistent challenges in the housing market and consumer wage growth, potentially further impacting consumption.

Beijing recently targeted consumption and domestic demand with new policy measures. Their effectiveness will be crucial for China to achieve its 5% growth target.

Improving consumption may boost earnings and stock prices for China-dependent German firms.

Wholesale Inventories: Mixed Signals

On Friday, wholesale inventories declined by 0.2% in November, while retail inventories excluding autos increased, signaling diverging trends.

The data signals two possible scenarios. Firstly, auto wholesalers could have experienced robust demand from dealers. However, wholesalers may also reduce inventories over concerns about interest rates impacting auto financing and demand.

US auto stocks had a negative Friday session, indicating uncertainty about the demand environment. The FOMC economic projections signaled fewer rate cuts, which may affect consumer appetite for auto financing.

US Markets: Crypto and Auto Stocks Weigh on the Nasdaq

US equity markets faced selling pressure on Friday. The Nasdaq Composite Index and the S&P 500 slid by 1.49% and 1.11%, respectively, while the Dow fell 0.77%.

Auto stocks Tesla Inc. (TSLA) posted a 4.95% loss, while Ford Motor Co. (F) declined by 0.40%, contributing to Friday’s pullback.

However, crypto stocks also weighed on the Nasdaq as bitcoin (BTC) pulled further back from its December 17 all-time high of $108,231. Crypto-related stock MicroStrategy (MSTR) dropped by 3.24%, while Marathon Holdings (MARA) and Riot Platforms (RIOT) declined by 4.46% and 4.85%, respectively.

HODL15Capital shared the world’s top 60 companies, ranked by BTC holdings. MicroStrategy topped the table, holding 444,262 BTC. Marathon Holdings and Riot Platform had 44,394 and 17,429 BTC holdings, respectively. US-listed firms held the top 8 spots despite the Biden administration and SEC’s anti-crypto stance.

Meanwhile, 10-year US Treasury yields advanced, further pressuring equity markets.

US Housing Sector Data and Manufacturing in Focus

In Monday’s US session, the Chicago PMI and Dallas Fed Manufacturing Index could give insights into the demand backdrop. Upbeat data may signal a potential pickup in manufacturing sector activity. While improving demand may support US-focused German stocks, a hotter US economy may also reduce bets on a Q1 2025 Fed rate cut.

A less dovish Fed rate path may raise borrowing costs, possibly affecting corporate earnings and stock prices.

Other stats include pending home sales. However, unless there is a sharp fall in pending sales, the data will likely play second fiddle to the manufacturing sector-related numbers.

Near-Term Outlook

The DAX will hinge on Euro area PMI data, tariff developments, and this week’s PMIs from China. Upbeat PMIs could signal a pickup in demand, driving the DAX toward its record high of 20,523. However, tariff threats and weaker demand would paint a grim picture, potentially dragging the DAX toward 19,500.

As of Monday morning, futures pointed to a mixed session. DAX futures were up 14 points, while the Nasdaq-mini futures dropped by 21 points.

DAX Technical Indicators

Daily Chart

Following Friday’s gains, the DAX sits above the 50-day and 200-day EMAs, confirming bullish price trends.

If the DAX returns to 20,000, the bulls could target 20,350 next. A break above 20,350 could signal a move toward the record high of 20,523.

China’s stimulus-related news, Tariff-related chatter, US economic indicators, and central bank commentary will influence DAX trends.

Conversely, a DAX drop below the 19,675 support level and 50-day EMA could bring 19,500 into sight. However, buying pressure could increase at the 19,657 support level. The 50-day EMA is confluent with it.

With the 14-day RSI at 52.83, the DAX could return to its 20,523 record high before entering overbought territory (RSI higher than 70).

Final Thoughts

The DAX remains sensitive to global market dynamics, including US economic data, tariffs, Chinese economic indicators, and central bank policy guidance. More volatility is likely amid the Fed’s less dovish outlook and tariff warnings. Investors should also consider US tariffs on China. This scenario may intensify competition, potentially weighing on demand for German goods.

Discover how global market dynamics shape DAX performance in our in-depth analysis here.