Dax Index News: Market Outlook Hinges on US Tariffs, Fed Policy

DAX Opens Higher on Corporate Earnings

The DAX Index opened higher on Tuesday, February 4, advancing by 0.20% to 21,470 as corporate earnings offset tariff jitters

US Tariff Developments in Focus

Despite the early gains, US tariff developments remained a key headwind for the DAX. On February 3, US President Trump reaffirmed plans to impose tariffs on EU goods, sending the DAX down 1.40% to 21,428. However, Trump’s suspension of tariffs on Canadian and Mexican goods could raise hopes of a potential US-EU deal, delivering early gains.

Daniel Kral, European macro specialist for Oxford Economics, highlighted the challenges facing EU trade:

“EU’s rising trade surplus with the US has been offsetting a rising trade deficit with China. This may soon be over. The EU industry now finds itself squeezed between China on steroids (supply-side stimulus, weak domestic demand, excess capacity) and a protectionist US. It’s not looking good.”

Sector Performance: Auto Struggle Amid Tariff Uncertainty

Tariff-sensitive auto stocks extended their losses on February 4. BMW and Volkswagen dropped by 0.87% and 0.80%, while Mercedes-Benz Group opened down 0.93%. Potential US tariffs on the EU’s auto sector weighed on sentiment

Meanwhile, Infineon Technologies soared 11% with better-than-expected earnings and forward guidance fueling a breakout. Crucially the early rally pushed the DAX into positive territory at the open.

US Markets Recap

On February 3, US equity markets posted losses amid tariff concerns. The Nasdaq Composite Index slid by 1.20%, while the Dow and S&P 500 declined by 0.28% and 0.76%, respectively.

US President Trump announced a suspension of tariffs on Canadian and Mexican goods after agreements on stricter border controls to curb fentanyl trafficking and illegal immigration from Mexico. However, tariffs on China came into effect at 0501 GMT, February 4. Trump will reportedly speak with China’s Premier Xi Jinping later this week.

US Manufacturing PMI data contributed to the pullback. The ISM Manufacturing PMI rose from 49.3 in December to 50.9 in January. Significantly, the ISM Manufacturing Employment Index climbed from 45.3 to 50.3, while the ISM Manufacturing Prices Index increased from 52.5 to 54.9. These PMI trends reinforced expectations of a more hawkish Fed, weighing on equity markets.

US Labor Market in Focus

Looking ahead to Tuesday’s US session, JOLTS job openings will influence sentiment toward the Fed rate path. Economists forecast job openings to drop from 8.098 million in November to 7.880 million in December.

A larger-than-expected fall may signal weaker wage growth, potentially dampening consumer spending and inflationary pressures. A softer inflation outlook would support a more dovish Fed rate path, potentially boosting demand for German-listed stocks. Lower borrowing costs could raise company earnings and valuations.

Conversely, an unexpected rise in job openings could temper expectations of H1 2025 Fed rate cuts, impacting the DAX Index.

Investors should also monitor developments in US trade policy and FOMC members’ comments on the potential economic impact of tariffs.

Near-Term Outlook

The DAX’s trajectory hinges on upcoming private sector PMIs, US labor market data, and central bank forward guidance.

• A dovish policy outlook and softer economic data could drive the DAX toward its all-time high of 21,801.
• A more hawkish policy outlook and upbeat economic indicators may drag the DAX toward 21,000.

Beyond the economic calendar, tariff developments could prove pivotal for risk sentiment. Ongoing threats of US tariffs on EU goods and retaliatory moves by China and the EU could spook investors.

As of Tuesday morning, futures pointed to a testy session. The Nasdaq 100 mini dropped 1 point.

DAX Technical Indicators

Daily Chart

Despite Monday’s sell-off, the DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs), affirming bullish price signals.

If the DAX breaks above 21,500, the Index could rise toward its record high of 21,801 next. A breakout above 21,801 could pave the way for a rally toward 22,000.

Conversely, a DAX break below 21,350 could signal a fall toward 21,000. A fall through 21,000 may bring 20,750 into play.

With the 14-day Relative Strength Index (RSI) at 67.04, the DAX could climb to 21,801 before entering overbought territory (RSI higher than 70).

Final Thoughts

The DAX remains at the crossroads of tariff negotiations, central bank guidance, and economic data releases. Investors should closely monitor upcoming US labor market figures and European PMI data for further directional cues. Trade-related developments remain a crucial driver of sentiment.

For more updates on DAX movements, US policy risks, and central bank forward guidance, stay tuned to our latest analysis here.