DAX Index News: Market Eyes Powell’s Jackson Hole Speech Amid Rate Cut Speculation

Market Overview

On Thursday, August 22, the DAX advanced by 0.24%, following a 0.50% gain from the previous day, closing at 18,493.

Key DAX Market Movers on Thursday

Bank stocks topped the table, with Deutsche Bank and Commerzbank seeing gains of 4.00% and 2.12%, respectively. Investors reacted positively to the news of Deutsche Bank settling with plaintiffs in lawsuits relating to the Postbank acquisition.

German Private Sector PMIs Support ECB Rate Cut Expectations

Germany’s HCOB Services PMI fell from 52.5 in July to 51.4 in August, supporting expectations of a September ECB rate cut. The manufacturing sector also deteriorated, with the HCOB Manufacturing PMI dropping from 49.1 to 48.5.

The PMI survey highlighted a fall in employment and input prices, trends that may influence the ECB rate path.

Hamburg Commercial Bank Chief Economist Dr. Cyrus de la Rubia commented,

“The struggles in manufacturing are starting to spill over into the otherwise steady services sector. For the third month in a row, services activity growth has slowed down. New business is barely growing, and backlogs declined once again. The export side of services, including tourism, isn’t offering much support either, shrinking at an even faster rate than in July.”

Wage Growth and ECB Minutes Signal September Rate Cut Debate

Additionally, slower wage growth across the Eurozone fueled speculation about a possible ECB rate cut. Wage growth slowed from 4.74% in Q1 2024 to 3.55% in Q2 2024. Weaker wage growth may reduce disposable income, dampening consumer spending and demand-driven inflation.

Meanwhile, the ECB monetary policy meeting minutes signaled rate cut discussions in September, raising hopes of a 25-basis point rate cut. Lower borrowing costs could boost company earnings and stock prices, subject to the macroeconomic environment.

US Jobless Claims and Services PMI Ease Recession Fears

Initial jobless claims rose modestly from 228k in the week ending August 10 to 232k in the week ending August 17.

Furthermore, the S&P Global Services PMI increased from 55.0 in July to 55.2 in August. The economic data reflected a resilient US labor market and economy, easing fears of a hard landing.

Despite this, investors expect a 25-basis point September Fed rate cut to bolster the US labor market, boosting demand for DAX-listed stocks.

Expert Views on the US Labor Market

Arch Capital Global Chief Economist Parker Ross commented on the labor market data, stating,

“Overall, we are still seeing a very gradual deterioration underway in the jobless claims data. Continuing claims and insured unemployment rates reflect more labor market stress than initial claims, which is consistent with other indicators suggesting layoffs remain low but workers are struggling to find a new job once unemployed.”

US Market Trends

On Thursday, August 22, 10-year US Treasury yields rose on falling bets on a 50-basis point Fed rate cut. Higher yields impacted the US equity markets. The Nasdaq Composite Index fell by 1.67%, while the Dow and the S&P 500 saw declines of 0.43% and 0.89%, respectively.

US Economic Calendar

On Friday, August 23, Fed Chair Powell’s speech at the Jackson Hole Symposium will be crucial for the global markets. A more hawkish-than-expected monetary policy stance could sink investor bets on a September Fed rate cut, possibly fueling a DAX sell-off.

Conversely, support for multiple 2024 Fed rate cuts and a positive economic outlook could drive demand for DAX-listed stocks.

Expert Views on the US Labor Market

Wall Street Journal Chief Economics Correspondent Nick Timiraos suggested a possible Fed rate path, stating,

“Officials could cut rates by a quarter-point at each of their next few meetings and then speed up or slow down reductions depending on how the economy fares early next year. If the economy enters a sharper slowdown, they could cut rates in larger half-percentage-point increments to get interest rates closer to 3% by next spring.”

Near-Term Outlook

Near-term DAX trends will depend on Fed Chair Powell’s speech. A dovish stance, supporting multiple 2024 Fed rate cuts with a positive economic outlook, could push the DAX toward 19,000. Conversely, a hawkish stance on interest rates might send the DAX below 18,000.

In the futures markets, the DAX was down by 4 points, while the Nasdaq Mini was up by 91 points.

Investors should stay alert, with Fed Chair Powell in focus. 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 remained above the 50-day and 200-day EMAs, affirming the bullish price signals.

A return to 18,500 could signal a move toward 18,750. A break above 18,750 could give the bulls a run at the all-time high of 18,893.

Fed Chair Powell’s speech will require consideration.

Conversely, a DAX drop below the 50-day EMA could give the bears a run at the 18,000 handle. A fall through 18,000 may signal a fall toward the 17,615 support level.

The 14-day RSI at 60.13 suggests a return to the all-time high of 18,893 before entering overbought territory.