Dax Index News: Market Braces for Fiscal Reform Bill Vote – Forecast and Key Levels

DAX Slides Amid ECB Rate Cut Uncertainty

The DAX fell sharply as investors weighed the European Central Bank’s (ECB) stance on US tariffs and their potential impact on the Eurozone economy.

On Thursday, March 20, the DAX slid by 1.24%, following Wednesday’s 0.40% loss, closing at 22,999.

ECB President Christine Lagarde warned that 25% US tariffs on EU goods could slow Eurozone GDP growth by 0.3 percentage points. She added that an escalation in tariffs could cut growth by 0.5 percentage points. However, the ECB President looked to reassure markets, stating:

“Glad to join European leaders at today’s Euro Summit for a discussion about the current economic situation. The path ahead is clouded by uncertainty, which Europe has the tools and means to overcome.”

DAX Losers: Auto Stocks Stumble on Tariff Uncertainty

The auto sector bore the brunt of investor concerns over tariffs. Volkswagen tumbled 4.15%, while BMW and Porsche slid by 3.53% and 3.40%, respectively. Daimler Truck Holding and Mercedes-Benz Group also ended the session with heavy losses.

Meanwhile, investors also locked in profits ahead of Friday’s crucial vote on Germany’s fiscal reform bill.

• Defense Aerospace Sectors: Rheinmetall AG slid by 3.19%, while Airbus and MTU Aero declined by 2.30% and 0.38%.
• Banking Sector: Commerzbank and Deutsche Bank dropped 3.30% and 2.03%, respectively. Uncertainty about the UniCredit deal contributed to Commerzbank’s losses.
• Construction Sector: Heidelberg Materials ended the session down 1.20%.

Fiscal Reform Bill Vote in Focus

Germany’s upper house of Parliament will vote on the fiscal reform bill on Friday, March 21. While passage is expected, implementation will be crucial as markets hope the reforms will jumpstart economic growth.

Daniel Kral, Europe macro specialist at Oxford Economics, expressed optimism:

“German fiscal stimulus and higher defence spending (with a focus on buying EU equipment) will boost demand and intra-European trade. This comes at a good time given the hostile external environment with the EU unable to export its way out of stagnation as before.”

Key reforms include:

• Effectively ending the debt brake to boost defense spending.
• A €500 billion infrastructure fund and a €100 billion climate and economic transformation fund.

US Labor Market and Manufacturing Sector Data Signal GDP Slowdown

US economic indicators on March 20 signaled a potential slowdown. Initial jobless claims rose from 221k (week ending March 8) to 233k (week ending March 15).

While the increase was modest, a sustained upward trend could signal a softening labor market. The jobless claims four-week average increased to 227k, up from 226k. A weaker labor market may weigh on wage growth, potentially curbing consumer spending that contributes over 60% to US GDP.

Manufacturing sector data also weighed on sentiment. The Philly Fed Manufacturing Index declined from 18.1 in February to 12.5 in March. The future new orders index for future general activity plunged to its lowest level since 2023, reflecting the potential impact of US tariffs on demand.

US Markets Fall Amid Economic Uncertainty

US equity markets trended lower on Thursday, March 20. Investor concerns over tariff policies and the US economy impacted risk assets. The Nasdaq Composite Index and the S&P 500 dropped by 0.33% and 0.22%, respectively, while the Dow edged 0.03% lower.

New US sanctions on Iran and reports of Israeli strikes on Gaza also pressured sentiment.

Key Market Focus: Tariffs and Fed Commentary

As markets brace for Germany’s parliamentary vote, traders should monitor tariff developments. Any threats of higher tariffs or retaliatory rhetoric from EU lawmakers could spook investors.

Additionally, traders should monitor FOMC commentary on the economic impact of tariffs, which could influence broader market sentiment.

Near-Term Outlook: Key Drivers

The DAX’s near-term outlook depends on:

• German fiscal policy: The Upper House vote will be crucial for DAX trends.
• Tariff developments: US-EU and US-China tariff disputes remain critical risks.
• Fed policy outlook: FOMC insights into tariffs, inflation, and the economic outlook could drive volatility.

Potential DAX Scenarios:

• Bullish Case: If trade tensions ease, fiscal stimulus is passed, and central banks signal dovish policies, the DAX could retest its record high of 23,476.
• Bearish Case: If US-EU trade tensions escalate, Germany’s Bundesrat rejects fiscal reforms, or the ECB adopts a hawkish stance, the DAX could slide toward 22,500.

As of Friday morning, the DAX futures were down 55 points, while the Nasdaq 100 mini fell 14 points, signaling a cautious end to the week.

DAX Technical Indicators

Daily Chart:

Despite Thursday’s sell-off, the DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs), suggesting strong bullish momentum. However, tariff and fiscal-driven volatility present potential short-term downside risks.

• Upside Target: A breakout above 23,350 could support a move to Tuesday’s record high of 23,476, with the bulls eyeing 23,750.
• Downside risk: A drop below 22,750 may test 22,500. A break below 22,500 would bring the 50-day EMA into play.

With the RSI at 55.36, the DAX remains below overbought levels (above 70), signaling room for a climb above its all-time high of 23,476 toward 23,750.

Conclusion: Key Drivers to Watch

Traders should closely monitor:

• Germany’s fiscal reform bill vote.
• US-EU and US-China trade tensions.
• FOMC member commentary on tariffs and the economic outlook.

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