Dax Index News: Losing Streak Extends as Fed Decision Looms Today

Three straight losses for the DAX – Will Eurozone inflation be the lifeline bulls need?

On Tuesday, December 17, the DAX fell 0.33%, following Monday’s 0.45% loss to close at 20,246. Significantly, the DAX extended its losing streak to three sessions.

Investors locked profits ahead of Wednesday’s Fed interest rate decision and economic projections.

Banks Retreat as Auto Stocks Post Mixed Performances

Deutsche Bank and Commerzbank contributed to Tuesday’s losses, falling 2.10% and 0.26%, respectively. Concerns about the Euro area economy and political turmoil in France and Germany pressured bank stocks.

However, auto stocks had a mixed session. Porsche advanced by 1.33%, while Volkswagen and BMW gained 0.49% and 0.95%, respectively. Mercedes Benz Group bucked the trend, ending the session in the red.

Stimulus measures to bolster the Chinese economy supported demand for the broader auto sector. On Tuesday, CN Wire shared news of Beijing planning to widen its budget deficit to 4% of GDP in 2025, up from the current 3% level. Beijing expects a 4% budget deficit to deliver 5% growth in 2025.

Germany’s Business Sentiment Weakens

Germany’s Ifo Business Climate Index fell from 85.6 in November to 84.7 in December, reflecting a deteriorating macroeconomic backdrop. While companies had a more positive view of the current situation, businesses were more pessimistic about the outlook. The Ifo noted that the weakness in the German economy has become chronic.’

Declining business sentiment may impact hiring trends, curbing wage growth, and consumer spending. Falling consumption could dampen inflationary pressures and also adversely affect the economy.

Eurozone Inflation in Focus

On Wednesday, December 18, Eurozone inflation figures will draw interest following the ECB’s recent rate cut. According to preliminary data, the annual inflation rate rose from 2.0% in October to 2.3% in November, exceeding the ECB’s 2% target.

An upward revision could temper bets on a Q1 2025 ECB rate cut, impacting demand for DAX-listed stocks. Conversely, a downward revision could push the DAX toward its December 13 record high of 20,523.

The Euro area economy and the ECB face challenging times. S&P Global PMI remarked on the Eurozone’s recent private sector PMIs, stating,

“Eurozone economy ends the year with a contraction in private sector output (Flash PMI at 49.5; Nov: 48.3), the sharpest drop in staffing numbers in 4 years, and rising inflation.”

What Do the Experts Think About the Economic Outlook?

However, an end to Germany and France’s political woes could change the landscape. Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, highlighted France and Germany’s political woes as barriers to growth, saying,

“Germany and France, the Eurozone’s two biggest economies, are currently in politically uncertain waters. This is preventing the necessary reforms from being implemented in the short term to boost growth again and is contributing to the ongoing weakness in both countries. However, this situation also entails upside risks. If future governments manage to chart a clear course, there could still be positive surprises next year.”

Will US Retail Sales Sink Q1 2025 Fed Rate Cut Bets?

US retail sales increased by 0.7% month-on-month in November, up from a 0.5% rise in October, signaling resilient consumer demand. While positive for the US economy, stronger spending could fuel demand-driven inflation, potentially leading to a more hawkish Fed rate path.

The upbeat data weighed on the DAX as a higher-for-longer Fed rate path may impact company earnings and stock prices.

US Markets Retreat: Fed in Focus

US equity markets ended the Tuesday session in negative territory as investors locked in profits ahead of the Fed interest rate decision and FOMC Economic Projections. The Nasdaq Composite Index and the S&P 500 posted losses of 0.32% and 0.39%, respectively. Meanwhile, the Dow extended its losing streak to nine sessions, falling 0.61%,

Rising 10-year Treasury yields, hitting a three-week high of 4.442%, weighed on market sentiment.

US Federal Reserve in the Spotlight

Later in the Wednesday session, investor focus will shift to the Fed’s interest rate decision and FOMC economic projections. Markets expect the Fed to cut rates by 25 basis points. However, recent US economic data have weakened bets on a January Fed rate cut.

Investors may tread carefully ahead of the FOMC projections. More hawkish Fed Funds Rate projections could materially impact demand for riskier assets.

US data, including building permits and housing starts, will unlikely influence the DAX.

Near-Term Outlook

The DAX’s near-term trends hinge on Euro area inflation, the Fed’s forward guidance, and ECB chatter.

A hawkish Fed and a cautious ECB stance on inflation could pull the DAX toward 20,000. Conversely, softer Eurozone inflation may bolster bets on a Q1 2025 ECB rate cut supporting a DAX move toward 20,500. However, the Fed rate cut and projections will be crucial today.

Investors should continue monitoring tariff-related news from the US, a potential headwind for the DAX.

As of Wednesday morning, futures pointed to a testy start to the session. DAX futures were down 43 points, while the Nasdaq-mini futures gained 18 points.

DAX Technical Indicators

Daily Chart

Despite Tuesday’s fall below 20,300, the DAX remains comfortably above the 50-day and 200-day EMAs, sending bullish price signals.

If the DAX returns to Friday’s record high of 20,553, it could support a move toward 21,750 next. Furthermore, a break above 20,750 may enable the bulls to target the 21,000 level.

Euro area inflation, ECB commentary, and sentiment toward the Fed rate path will influence DAX trends.

Conversely, a DAX drop below 20,150 could signal a fall through 20,000. If the DAX falls below 20,000, the bears could target the 19,675 support level and 50-day EMA.

With the 14-day RSI at 63.95, the DAX may return to the record high of 20,523 before entering overbought territory.

Final Thoughts

The DAX remains highly sensitive to global drivers, including the Fed’s rate path, US tariff concerns, and ECB guidance. Investors should prepare for volatility as the FOMC decision and economic projections loom.

Explore in-depth forecasts and actionable strategies here for navigating DAX volatility.