Dax Index News: Market Awaits Eurozone Inflation for ECB Rate Path Clarity

DAX Closes the Session Flat Amid Increasing Economic Uncertainty

President Trump’s threat of 25% tariffs on EU goods continued to impact demand for German-listed stocks. Trump has also threatened sweeping tariffs on autos, pharmaceuticals, and semiconductor chips, another hurdle for EU lawmakers to navigate.

On Friday, February 28, the DAX ended the session flat at 22,551 after sliding 1.07% on Thursday. Economic uncertainty and trade tensions continued to pressure investor sentiment.

Sector Highlights: Auto and Tech Stocks Leave the DAX Flat

Auto and tech stocks led Friday’s muted session as investors considered the potential impact of tariffs on demand for German goods.

Infineon Technologies led the losses, sliding by 1.68%, while SAP declined by 0.82%. German automaker Porsche dropped by 1.02%, while Mercedes-Benz Group and Volkswagen fell 0.35% and 0.19%, respectively.

German Inflation Data Test ECB Rate Cut Bets

On Friday, February 28, German economic data, particularly inflation figures, tested expectations for multiple ECB rate cuts.

• Retail sales rose 0.2% month-on-month in January after sliding by 0.9% in December.
• Unemployment remained at 6.2% in February. A steady labor market may support wage growth, consumer sentiment, and spending, potentially fueling demand-driven inflation.
• Germany’s annual inflation rate held steady at 2.3% in February, reinforcing concerns about persistent price pressures. The ECB could signal a more hawkish stance if demand and inflationary pressures rise.

If the ECB adopts a more hawkish stance due to inflation risks, borrowing costs could rise, potentially weighing on corporate earnings. Conversely, a dovish shift could provide relief for rate-sensitive stocks.

Eurozone Inflation Data in Focus Ahead of ECB Meeting

On Monday, March 3, finalized Eurozone inflation figures will draw investor interest ahead of Thursday’s ECB monetary policy decision.

According to preliminary data, the Eurozone’s annual inflation rate eased from 2.5% in January to 2.3% in February. A softer inflation reading could cement expectations of a March ECB rate cut and support a more dovish ECB rate path. Conversely, an upward revision may force the ECB to signal a post-March pause, allowing time to assess the impact of US tariffs on inflation and economic growth.

A more dovish ECB rate path would lower borrowing costs, potentially boosting corporate earnings, while a more hawkish ECB could impact demand for rate-sensitive stocks.

Other stats include finalized Manufacturing PMI data. However, these will likely play second fiddle to the inflation report.

US Data Strengthens Fed Rate Cut Bets

Meanwhile, the all-important US Personal Income and Outlays Report boosted demand for risk assets late in the European session.

• The Core PCE Price Index rose 2.6% year-on-year in January, down from 2.9% in December.
• Personal spending dropped by 0.2% month-on-month in January after rising 0.8% in December.
• Meanwhile, personal income rose 0.9% month-on-month, following a 0.4% increase in December.

While the pickup in personal income could boost consumer spending, the softer inflation reading raised bets on a June Fed rate cut. Expectations of a Fed rate cut helped the DAX recover from earlier losses.

US Markets Rebound as Fed Rate Expectations Shift

US equity markets rallied on Friday, February 28, as focus shifted from Trump’s tariff threats to the Fed’s rate outlook. The Nasdaq Composite Index and the S&P 500 gained 1.63% and 1.59%, respectively, while the Dow rose 1.39%.

According to the CME FedWatch Tool, the probability of a June Fed rate cut rose from 69.9% to 80.4% on February 28, reinforcing bullish sentiment across risk assets.

Key Economic Data Ahead: US Manufacturing PMI in Focus

On March 3, the ISM Manufacturing PMI will give investors insights into the demand environment. Economists expect the PMI to slip from 50.9 in January to 50.8 in February.

A lower-than-expected PMI reading could spark fears of an economic slowdown, supporting a more dovish Fed rate path. Rising bets on multiple Fed rate cuts may drive demand for German-listed stocks. However, a higher PMI could signal a less dovish Fed rate path, potentially pressuring the DAX.

Beyond the data, US tariff developments will remain a key driver of sentiment. Rising EU-US tensions could overshadow economic indicators.

Near-Term Outlook

The DAX’s near-term direction hinges on:

• German fiscal policy: Progress on a defense fund and stimulus measures could support the index.
• Trade tensions – Escalating US-EU and US-China trade disputes may create downside risks.
• Inflation trends – Eurozone inflation data will play a crucial role in influencing the ECB’s rate path.

A combination of fiscal stimulus, easing trade tensions, and dovish central bank signals could push the DAX toward 22,750. However, resistance to loosening Germany’s debt brake, escalating trade risks, and hawkish policy decisions could send the index lower toward 22,000.

As of Monday morning, the DAX mini was up 124 points, signaling a positive start to the week. Manufacturing sector data from China and Beijing’s stimulus pledges set the tone for the European session. Meanwhile, the Nasdaq 100 mini dropped 7 points.

DAX Technical Indicators

Daily Chart:

After last week’s gains, the DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs). However, tariff-fueled volatility suggests potential short-term downside risks within the broader uptrend.

A return to 22,750 could enable the bulls to target the February 19 record high of 22,935 next. If the DAX breaks above 22,935, 23,000 would be the next major resistance level.

Conversely, if the DAX drops below 22,500, 22,150 and the 50-day EMA will be the next key support levels.

With the RSI at 62.98, the DAX remains below overbought levels (above 70), potentially allowing a move toward the 22,935 high.

Conclusion: Key Drivers to Watch

Traders should closely monitor:

• German fiscal policy updates.
• Eurozone inflation and US Manufacturing PMI numbers.
• ECB and Fed commentary.
• US-EU and US-China trade tensions.

Further detailed analysis of global market influences on the DAX is available here.