Dax Index News: Inflation and ECB Policy Insights Influence Market Sentiment Today

DAX Opens Higher as Dovish Central Bank Sentiment Resonated

The DAX Index began trading on Thursday, January 16, up 0.42% to 20,662. Finalized German inflation numbers drew early interest. However, hopes for a more dovish Fed rate path contributed to early gains.

Sector Performance:

Porsche and Volkswagen advanced by 0.49% and 0.51%, respectively, with BMW and Mercedes-Benz Group also positing early gains. Market sentiment toward the Fed rate path and potentially more moderate US tariffs drove demand for auto stocks.

Banking stocks joined the auto sector in positive territory. Commerzbank and Deutsche Bank advanced by 0.72% and 0.52%, respectively, after strong US bank earnings results.

However, Zalando led the gains, surging 15.11%. Markets responded to Richemont’s 10% rise in Q3 sales, fueling demand for retail stocks.

German Inflation and ECB Policy Outlook

Germany’s annual inflation rate rose from 2.2% in November to 2.6% in December, testing market bets on aggressive ECB rate cuts.

However, Eurozone trade data and the ECB’s monetary policy minutes also require consideration later this morning. Economists forecast the Eurozone’s trade surplus to widen from €6.8 billion in October to €8.5 billion in November.

A wider trade surplus with the US could fuel speculation about US tariffs on EU goods, impacting demand for German export stocks. Conversely, weaker exports may ease concerns about US tariffs.

Amid market expectations of multiple ECB rate cuts, the ECB minutes could give insights into the policy outlook. ECB warnings against cutting rates too quickly may temper demand for rate-sensitive German stocks.

US Markets Rally on Core Inflation Drop

US markets soared on Wednesday, January 15, as investors reacted to the US CPI Report. The Nasdaq Composite Index rallied 2.45%, while the Dow and the S&P 500 advanced by 1.65% and 1.83%, respectively.

The US core inflation rate eased to 3.2% in December, down from 3.3% in November. Cooler Core Services inflation improved sentiment on the Fed rate path, boosting demand for riskier assets. Notably, 10-year US Treasury yields fell sharply, suggesting expectations of a more dovish Fed stance.

A more dovish Fed rate path could lower borrowing costs, potentially boosting company earnings and valuations.

Key US Data to Watch: Jobless Claims and Retail Sales

In the upcoming US session, initial jobless claims and retail sales could further influence the Fed rate path.

Economists expect initial jobless claims to rise from 201k (week ending January 4) to 210k (week ending January 11). An unexpected fall below 200k could retrigger fears of a hawkish Fed rate stance, impacting demand for riskier assets. Conversely, a rise above 220k could fuel risk sentiment on rate cut hopes.

Labor market conditions can influence wage growth trends, consumer spending, and inflationary pressures.

However, retail sales trends can also impact inflation and the Fed’s policy outlook. Economists forecast retail sales to rise 0.6% month-on-month in December, down slightly from November’s 0.7% increase. Higher-than-expected figures could fuel demand-driven inflation, potentially delaying Fed rate cuts. Conversely, weaker data may support bets on the first half of the 2025 Fed rate cut.

Other stats include the Philly Fed Manufacturing Index and NAHB Housing Market Index data. However, these will likely play second fiddle to the labor market and retail sales reports.

Near-Term Outlook

The DAX’s near-term trend hinges on US economic data, central bank forward guidance, and US tariff developments. Expectations of a more hawkish Fed rate path or US tariff threats could pull the DAX toward 20,000. However, weaker data and the absence of tariff-related news could drive the DAX to new highs on central bank rate cut expectations.

As of Thursday morning, the Nasdaq-mini futures jumped 155 points, driving early demand for DAX-listed stocks.

DAX Technical Indicators

Daily Chart

Following Wednesday’s breakout, the DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs), sending bullish price signals.

If the DAX returns to Thursday morning’s record high of 20,675, the Index could target 20,750 next. A break above 20,750 would bring 21,000 into sight.

Conversely, a DAX break below 20,500 could signal a drop toward 20,000. A fall through 20,000 would bring the 50-day EMA into play.

With the 14-day Relative Strength Index (RSI) at 67.47, the DAX could target 20,675 before entering overbought territory (RSI higher than 70).

Final Thoughts

The DAX is poised for near-term volatility, influenced by US economic data, central bank policies, and tariff developments. ECB rate cut expectations and a weaker EUR/USD lend support. Investors should also monitor US tariff news and Fed commentary for directional cues.

Investors should stay updated on global developments here to navigate the ever-changing market landscape.