While facing the prospect of a five-day losing streak on Tuesday, April 1, the DAX opened higher. However, dip buyer support could be brief. Last week, President Trump announced a 25% tariff on all car imports into the US, effective April 2. He also reiterated plans for reciprocal tariffs on March 30 effective April 2, dubbed Liberation Day.
Tariff developments remain central to risk sentiment. Any suggestions of a flip-flop on Liberation Day tariffs could trigger a broad-based market rebound. However, uncertainty continues to plague markets, with investors hoping for last-minute U-turns.
The Kobeissi Letter remarked on rising tariff uncertainty, stating:
“President Trump’s team is weighing “broader and higher tariffs” ahead of Wednesday’s reciprocal tariffs deadline, per WSJ. President Trump is reportedly weighing ‘an across-the-board hike of up to 20%.’ Again, April 2nd is NOT the end of tariff uncertainty.”
Automakers’ shares opened the Tuesday session mixed as auto tariffs loomed. Volkswagen led the gains, rising 0.97, while BMW and Porsche also moved higher. However, Mercedes-Benz Group bucked the trend with early losses, highlighting tariff uncertainties.
Tech stocks, another potential tariff target, also moved higher. Infineon Technologies rose 0.73%, while SAP opened 1.33% higher.
While tariffs dominate headlines, Eurozone inflation data on April 1 also requires consideration. Economists forecast the annual inflation rate to ease from 2.3% in February to 2.2% in March. A drop toward the ECB’s 2% inflation target could bolster bets on multiple ECB rate cuts.
However, market relief from softer inflation could be short-lived. The escalation in the global trade war has fueled uncertainties surrounding inflation and the economic outlook. Central banks may take a more cautious stance on monetary policy adjustments until greater clarity emerges.
On Monday, March 31, US equity markets closed mixed. The Nasdaq Composite Index fell for a fourth straight session, down 0.14%. Meanwhile, the Dow and the S&P 500 snapped three-day losing streaks, rising 1.00% and 0.55%, respectively. Pre-tariff rotation into defensive stocks pushed the Dow and the S&P 500 higher.
Markets will shift focus to the US manufacturing sector and the labor market on April 1 amid increasing odds for a US recession.
Economists forecast the ISM Manufacturing PMI to drop from 50.3 in February to 49.5 in March. A larger-than-expected decline below the neutral 50 level could raise the chances of a recession.
Meanwhile, JOLTS job openings need consideration ahead of Friday’s crucial US Jobs Report. Economists expect job openings to fall from 7.74 million in January to 7.63 million in February. A larger-than-expected fall could stoke recession fears, while a higher reading could ease concerns about the US economic outlook.
Beyond data, tariff developments and FOMC commentary remain pivotal. A worsening trade dispute could deepen losses for German exporters. Conversely, any softening in rhetoric may offer the DAX some price support.
The DAX’s path will depend on central bank policies, economic data, and trade developments:
As of Tuesday morning, US futures pointed to a cautious open, with the Nasdaq 100 mini down 46 points.
A positive open, the DAX sits above the 50-day and 200-day Exponential Moving Averages (EMA), sending bullish price signals.
A breakout above 22,500 could enable the bulls to target 22,750 as the next upside target.
Conversely, a DAX drop below the 50-day EMA would bring 22,000 into play. A break below 22,000 could indicate a fall toward 21,750, opening the door to 21,500.
The 14-day Relative Strength Index (RSI) at 45.66 suggests the DAX could fall toward 21,500 before entering oversold territory (RSI< 30).
Key market forces influencing the DAX outlook include:
With volatility elevated, traders should closely monitor data releases, policy updates, and technical levels here.
With over 28 years of experience in the financial industry, Bob has worked with various global rating agencies and multinational banks. Currently he is covering currencies, commodities, alternative asset classes and global equities, focusing mostly on European and Asian markets.