Dax Index News: Market Outlook Hinges on ECB Rate Path and US Tariff Updates

DAX Hits Reverse Amid US Tariff Uncertainty

The DAX Index opened lower on Tuesday, January 7, down 0.03% to 20,209 as US tariff developments weighed on investor sentiment.

On Monday, January 6, reports of Trump’s aides shifting focus from sweeping tariffs to import duties targeting critical sectors fueled demand for German export stocks. However, Trump dismissed the reports as fake news, weighing on the DAX early in the Tuesday session.

Sector Performance: Auto Sector Hit by Tariff Worries

Renewed concerns over US tariffs targeting the EU auto sector rattled German automakers.

Mercedes-Benz Group slid by 1,32% on Tuesday morning, with BMW and Volkswagen seeing losses of 0.69% and 0.52%, respectively. Porsche also opened in the red.

Banking stocks were not spared, with Commerzbank and Deutsche Bank under pressure amid fears of US deregulation impacting the competitiveness of EU banks.

Eurozone Data Underpins ECB Speculation

Attention will turn to Eurozone inflation and unemployment data on Tuesday, which could influence the ECB rate path. Economists forecast the Eurozone’s annual inflation rate to rise from 2.2% in November to 2.4% in December, exceeding the ECB’s 2% target.

Hotter-than-expected inflation could temper bets on aggressive ECB rate cuts. A less dovish ECB rate path may leave borrowing costs higher, potentially impacting earnings and stock valuations.

Investors should also consider unemployment trends. Economists predict the Eurozone’s unemployment rate will rise from 6.3% in October to 6.4% in November. A softer labor market may weaken wage growth, dampening consumer spending and demand-driven inflation.

Inflation and labor market trends remain the ECB’s focal points.

US Markets React to Tariff and Economic Data

US equity markets had a mixed start to the week on January 6. The Nasdaq Composite Index and the S&P 500 advanced by 1.24% and 0.55%, respectively, while the Dow edged 0.06% lower.

Market reactions to US tariff-related news influenced market trends, leaving the Dow in negative territory. However, the Nasdaq Composite Index and S&P 500 fell back from session highs following Trump’s reaction to the tariff reports.

Meanwhile, weaker-than-expected US Services PMI data eased hawkish Fed rate path bets, supporting demand for riskier assets. The S&P Global Services PMI rose to 56.8 in December, up from November’s 56.1 while down from a preliminary 58.5.

Key Data to Watch: ISM PMI and JOLTS Job Openings

In Tuesday’s US session, the ISM Services PMI and JOLTS Job Openings Reports will be pivotal for Fed rate expectations.

Economists forecast the ISM Services PMI to increase from 52.1 in November to 53.0 in December. A sharp pickup in service sector activity, employment, and prices could retrigger expectations of a more hawkish Fed rate path. Conversely, an unexpected fall in the headline PMI, employment, and prices may fuel bets on a March Fed rate cut.

US labor market data also requires consideration ahead of Friday’s crucial US Jobs Report. Economists expect JOLTS Job Openings to drop from 7.744 million in October to 7.700 million in November.

Fewer job openings may signal a deteriorating labor market, supporting a more dovish Fed rate path. Looser labor market conditions may curb wage growth, dampening consumer spending and inflationary pressures.

Meanwhile, US tariff-related news needs consideration. Renewed threats of tariffs on EU goods would likely weigh on DAX-listed stocks dependent on US demand. Auto and tech sector-related stocks would likely react to tariff-related chatter.

Near-Term Outlook

DAX trends will hinge on Euro area and US data, US tariff developments, and central bank commentary. Upbeat data, expectations of less dovish Fed and ECB rate paths, and tariff threats may drag the DAX toward 19,750. Conversely, softer data and an absence of tariff headlines may drive the DAX toward its record high of 20,523.

As of Tuesday morning, the Nasdaq-mini futures dropped by 20 points, potentially impacting demand for German stocks.

DAX Technical Indicators

Daily Chart

Following Monday’s rally, the DAX sits comfortably above the 50-day and 200-day Exponential Moving Averages (EMAs), confirming bullish price trends.

If the DAX breaks returns to 20,350, the Index could target the record high of 20,523. A break above 20,523 would bring 20,750 into sight.

Conversely, a DAX drop below 20,000 may enable the bears to target the 50-day EMA and the 19,675 support level. However, buying pressure might intensify at the 19,657 support level. The 50-day EMA is confluent with it.

With the 14-day RSI at 50.03, the DAX could return to its 20,523 record high before entering overbought territory (RSI higher than 70).

Final Thoughts

The DAX remains highly sensitive to global developments, including Euro area and US economic data, tariff policies, and central bank commentary. While ECB rate cut hopes may provide support, investors should consider US tariff developments and sentiment toward the Fed rate path.

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