DAX Index News: Investors Eye German Inflation for ECB Rate Signals

Market Overview

On Wednesday, August 28, the DAX advanced by 0.54%, following a 0.35% gain from the previous day, closing at 18,782.

Key DAX Market Movers

The insurance and chemical sectors drove the DAX to its highest close since May.

Chemical sector stocks Symrise AG and Covestro rallied 3.30% and 3.08%, respectively. News of ADNOC completing its due diligence on plans to acquire Covestro boosted chemical sector stocks.

Insurance sector stocks Munich Re and Allianz gained 1.83% and 1.59%, respectively. Investors reacted to better-than-expected half-year operating profits from Belgian insurance company Ageas.

However, the auto sector limited overall gains as disappointing EU car sales figures for July weighed on investor sentiment.

BMW slid by 1.46%, while Mercedes Benz Group declined by 0.67%. Volkswagen fell by 0.54%, while Porsche ended the session down 0.47%.

German Inflation Crucial for the ECB

On Thursday, inflation figures from Germany will draw investor interest.

Economists forecast the annual inflation rate to fall from 2.3% in July to 2.1% in August. Softer-than-expected inflation numbers could fuel investor speculation about a September ECB rate cut.

A more dovish ECB rate path may lower company borrowing costs, possibly raising profits and buyer demand for stocks.

Will ECB Chief Economist Philip Lane Challenge Rate Cut Bets?

ECB Chief Economist Philip Lane is on the calendar to speak on Thursday. Views on inflation, the economy, and the timeline for an ECB rate cut need consideration.

This week, Philip Lane stated,

“The return to target is not yet secure. The monetary stance will have to remain in restrictive territory for as long as needed to shepherd the disinflation process toward a timely return to the target.”

A more dovish stance could boost buyer appetite for DAX-listed stocks.

Expert Views on the German Economy and the ECB Rate Path

Oxford Economics Chief German Economist and ECB Commentator Oliver Rakau commented on the ECB’s focus on inflation, stating,

“What would Draghi do? Or maybe more correctly, what would Draghi have already done? Ifo employment intentions took another broad-based dive in August making a similar move in the EZ ESI data quite likely. IMO time for Lagarde to follow Powell’s lead and focus on the labour market.”

Daniel Kral, Europe Macro at Oxford Economics, commented on the German economy, stating,

“Germany has been the weak link in Europe with real GDP almost 10% below its pre pandemic trend = €300bln loss in constant prices. The weakness has been broad-based across components apart from.. government consumption. Everything is flat or shrinking apart from the size of govt.”

The consensus is that the ECB may need to cut rates to bolster the Eurozone economy.

US Market Trends

On Wednesday, the Nasdaq Composite Index slid by 1.12%, with Super Micro Computer’s (SMCI) share price tumbling 19.02% after news of a delay to its annual report filing. The Dow and the S&P 500 and saw losses of 0.39% and 0.60%, respectively.

After the market closed, NVIDIA released its earnings report, beating Wall Street expectations but falling short of top estimates. NVIDIA slid by 6.89% in after-hours trading.

US Economic Calendar

On Thursday, US GDP, housing sector, and labor market data will also need consideration. Unless there is a significant revision to the GDP figure, we expect the jobless claims to impact market risk sentiment more.

Economists forecast initial jobless claims to remain unchanged at 232k in the week ending August 24. A jump above 250k could raise bets on a 50-basis point September Fed rate cut. Moreover, a spike may retrigger fears of a hard US economic landing, possibly fueling a flight to safety.

Conversely, a fall in jobless claims may boost bets on a soft landing, driving demand for DAX-listed stocks.

Expert Views on the US Economic Outlook and Fed Rate Path

Arch Capital Global Chief Economist Parker Ross commented on the Fed rate path and a US recession, stating,

“A neutral rate of roughly 3% feels much more reasonable than the 4%+ from last year / early this year, so there is much less downside for rates from the current level unless recession concerns increase substantially. A recession would require a much more rapid Fed easing cycle and lower terminal rate below neutral, which would bring 10y UST yields down sharply.”

Near-Term Outlook

German inflation, the US jobless claims, and Friday’s US Personal Income and Outlays Report will likely dictate near-term DAX trends.

Softer inflation, higher jobless claims, and a fall in US personal spending may raise bets on September ECB and Fed rate cuts. Rising bets on September rate cuts could signal a DAX move toward 19,000. However, US recession jitters could drag the DAX below 18,000.

In the futures markets, the DAX and the Nasdaq Mini were down by 18 and 127 points, respectively.

Investors should stay alert, with central bank speakers and economic indicators likely to influence risk sentiment. Monitor the news wires, the economic calendar, and expert commentary to manage trading strategies.

Stay informed with our latest news and analysis to manage your risks effectively.

DAX Technical Indicators

Daily Chart

The DAX sat well above the 50-day and 200-day EMAs, affirming bullish price trends.

A return to the Wednesday high of 18,857 could give the bulls a run at the all-time high of 18,893. Furthermore, a breakout from $18,893 could signal a move to 19,000.

German inflation, US jobless claims, and central bank commentary require consideration.

Conversely, a drop below 18,750 might indicate a fall toward 18,500. A break below 18,500 may give the bears a run at the 50-day EMA.

The 14-day RSI at 66.36 suggests a return to the all-time high of 18,893 before entering overbought territory.