DAX Index News: Manufacturing Slump Raises Recession Concerns as ECB Rate Cut Looms

Market Overview

On Friday, August 30, the DAX slipped by 0.03%, after a 0.69% gain from the previous day, closing at 18,908. Significantly, the DAX struck a new all-time intraday high of 18,971.

Key DAX Market Movers

Siemens Energy rallied 1.76% on rising expectations of a September ECB rate cut. Similarly, Vonovia advanced by 1.70%, benefiting from ECB interest rate cut bets that could support real-estate stocks.

Commerzbank and Deutsche Bank saw gains of 0.87% and 0.55%, respectively. Easing concerns about a 50-basis point September Fed rate cut boosted buyer demand for bank stocks. The Fed’s rate path affects net interest margins.

Eurozone Inflation Boosts ECB Rate Cut Speculation

On Friday, August 30, Eurozone inflation figures fueled speculation about a September 25-basis point ECB rate cut.

The inflation rate fell from 2.6% in July to 2.2% in August.

Expert Views on Eurozone Inflation and the ECB Rate Path

ECB policymaker Francois Villeroy de Galhau supported a September ECB rate cut, reportedly stating,

“Unfortunately, our growth remains too weak. The balance of risks still needs to be monitored in Europe. It would be fair and wise to decide in favour of a new rate cut.”

Manufacturing PMI and the German Economy in Focus

On Monday, September 2, finalized Manufacturing PMIs for Germany will draw investor interest.

According to the preliminary survey, the HCOB Manufacturing PMI fell from 43.2 in July to 42,1 in August. As manufacturing accounts for about 20% of the German economy, a downward revision could heighten recession fears. An increasing threat of a German recession may support a September ECB rate cut.

Hamburg Commercial Bank Chief Economist Dr. Cyrus de la Rubia commented on the preliminary survey and Germany’s economic woes, stating,

“These numbers are a real mess. The recession in Germany’s manufacturing sector deepened in August, with no recovery in sight. In fact, new orders took a sharper dive than last month, mainly due to a significant drop in foreign demand, signalling more trouble ahead. Given this, it’s hardly surprising that companies are ramping up staff cuts and slashing inventories of inputs even more aggressively than before.”

US Economic Data Supports Fed Rate Cut Bets

On Friday, August 30, the Personal Income and Outlays Report supported bets on a 25-basis point September Fed rate cut.

The Core PCE Price Index increased by 2.6% year-on-year in July, mirroring the rise in June. The softer-than-expected rise bolstered investor bets on a 25-basis point rate cut. However, personal income and spending trends indicated a robust US economy, tempering expectations of a 50-basis point rate cut.

US Market Trends

On Friday, August 30, the Nasdaq Composite Index and the S&P 500 rallied 1.13% and 1.01%, respectively, while the Dow gained 0.55%.

US Economic Calendar

On Monday, investors should consider comments from FOMC members. Insights into the US economy, the labor market, inflation, and the Fed rate path require consideration.

Support for a 50-basis point Fed rate cut and expectations of a soft US landing could drive demand for DAX-listed stocks. Lower borrowing costs may boost company profits and stock prices.

Expert Views on the US Economic Outlook and Fed Rate Path

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, remarked on Friday’s inflation numbers, stating,

“US Jul core PCE deflator slightly softer at 0.16%mom/2.6%yoy (mkt +0.2%m/+2.7%y), from 2.6%y in Jun PCE deflator in line at 0.2%m/2.5%y. Leaves Fed on track to cut in Sep, which in absence of much weaker jobs looks like being -0.25%”

On Friday, August 6, the US Jobs Report will likely influence the Fed’s September interest rate decision.

Near-Term Outlook

Near-term DAX trends will likely hinge on central bank commentary and Friday’s US Jobs Report. Support for a 50-basis point Fed rate cut and a moderate deterioration in US labor market conditions could push the DAX above 19,000. However, the DAX may face downside risk if the ECB tempers bets on an ECB rate cut amid lingering fears of a German recession.

In the futures markets, the DAX was up 6 points, while the Nasdaq Mini was down 36 points.

Investors should stay alert with central bank speakers, and economic indicators likely 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 hovered well above the 50-day and 200-day EMAs, suggesting bullish price trends.

A breakout from Friday’s high of 18,971 could support a move toward 19,000. A break above 19,000 may bring 19,200 into play.

Manufacturing sector PMIs and central bank commentary require consideration.

Conversely, a break below 18,800 could signal a fall toward 18,750. A drop below 18,750 could bring the 18,500 level into play.

The 14-day RSI at 68.80 suggests a move to 19,000 before entering overbought territory.