Dax Index News: Market Braces for Fed Decision as Tariff Jitters Hit DAX Outlook

DAX Slides on Trump’s Election Victory

On Wednesday, November 6, the DAX slid by 1.13%, reversing Tuesday’s 0.57% gain, closing at 19,039. Trump’s US presidential election win and warnings of tariffs on EU goods impacted demand for DAX-listed stocks.

Major Stock Movers: Autos Hit Hard by Tariff Jitters

Autos are a likely US target for tariffs, reducing buyer demand. BMW and Mercedes-Benz Group were the worst performers, tumbling by 6.58% and 6.44%, respectively. Volkswagen and Porsche also saw heavy losses.

Retail and tech stocks also struggled amidst uncertainty about Trump’s tariff plans. Zalando and Adidas saw declines of 6.05% and 3.62%, respectively, while Infineon Technologies dropped by 3.20%.

Economic Data Provides Temporary Support

On Wednesday, German factory orders and services sector data temporarily boosted demand for DAX-listed stocks. Factory orders surged 4.2% in September after falling 5.4% in August.

Additionally, the HCOB Services PMI rose from 50.6 in September to 51.6 in October, up from a preliminary 51.4. Accounting for over 60% of Germany’s GDP, the Services PMI data suggested a possible economic recovery.

German Trade Data and Industrial Production in Focus

On Thursday, November 7, the focus shifts to Germany’s manufacturing sector. Economists forecast industrial production to drop by 1.0% in September, following a 2.9% rise in August.

Furthermore, economists expect exports to fall by 1.4% in September, potentially narrowing the trade surplus.

While falling exports and production would suggest weaker demand, September’s factory orders indicate a possible rebound in demand entering Q4 2024.

Trump’s US Presidential Election Win Raises Tariff Risks

On Wednesday, Donald Trump won the US presidential election, returning to the White House for a second term. During campaign speeches, Trump threatened up to 25% tariffs on EU goods, potentially impacting demand for German goods and the German economy.

The DAX fell to a Wednesday low of 19,008 as investors reacted to the news. Potential tariffs on German goods will likely remain a DAX headwind in the near term, potentially limiting gains.

Expert Views on the German Economy and Tariffs

On Wednesday, Europe macro specialist at Oxford Economics, Daniel Kral, remarked on Germany and Trump’s victory, stating,

“Germany has been the weak link in Europe with its economy flat and confidence downbeat, due to recent adverse shocks and China’s rise. Another one is coming with US tariffs (10% of Germany’s goods exports). A trade war with the US will also hit the EU’s small open economies hard.”

US Equity Market Overview

On Wednesday, November 6, US equity markets surged on Trump’s US election win. The Dow rallied by 3.57%, with the Nasdaq Composite Index and the S&P 500 advancing by 2.95% and 2.53%, respectively.

US Labor Market and the Federal Reserve

On Thursday, initial jobless claims will draw interest. Economists expect initial jobless claims to increase from 216k in the week ending October 25 to 221k in the week ending November 2.

An unexpected spike in jobless claims could raise investor bets on a December Fed rate cut, potentially driving the DAX toward 19,350. Conversely, a surprise fall in claims could dampen bets on a December Fed rate hike, pulling the DAX toward 18,750.

While the labor market data is significant, the Fed interest rate decision and press conference are crucial. Investors expect the Fed to cut interest rates by 25 basis points to 4.75%.

Unless there is a surprise policy decision, the FOMC press conference could impact market risk more. Support for a December rate cut could push the DAX toward 19,350. However, a hawkish stance could pull the DAX toward 18,750.

The interest rate decision and press conference are after the European closing bell, meaning the DAX will react to the Fed during Friday’s session.

Near-Term Outlook

In the near term, DAX trends will depend on the FOMC interest rate decision and press conference. A less dovish than expected Fed Chair Powell could impact demand for DAX-listed stocks, while support for multiple rate cuts and optimism toward a soft US economic landing could boost the DAX. Investors should also monitor EU tariff-related chatter from the US.

Futures indicate a positive start to the Thursday session. DAX futures were up 18 points, while the Nasdaq mini futures advanced by 23 points. Upbeat export figures from China potentially supported early demand for the DAX.

Investors should monitor President-elect Donald Trump-related comments on tariffs and economic data. Stay updated with our latest news and analysis to manage risks effectively.

DAX Technical Indicators

Daily Chart

After Wednesday’s sell-off, the DAX sits below the 50-day EMA while holding above the 200-day EMA. The EMAs sent bearish near-term but bullish longer-term price signals.

A break above the 50-day EMA could signal a move toward 19,350. Furthermore, a return to 19,350 may indicate bullish momentum, potentially allowing the bulls to target 19,500.

Investors should consider the economic indicators, comments from the US president-elect, and the Fed, which could influence market sentiment.

Conversely, a DAX drop below 19,000 could signal a fall toward the 18,750 level.

With the 14-day RSI at 43.76, the DAX may drop to 18,750 before signaling oversold conditions.