Dax Index News: Market Slips on Weak Demand Outlook as IMF Cuts Growth Forecasts

DAX Slips by 0.20% on Weak Demand Concerns

On Tuesday, October 22, the DAX slipped by 0.20%, following a 1% loss from the previous session, closing at 19,422.

Concerns about the US Presidential Election and demand from China impacted the DAX.

Major Stock Movers: Tech and Insurance Stocks Struggle While SAP Excels

On Wednesday, investors continued to react to Jefferies downgrading Munich Re Group, which slid by 2.75%, while Hannover Re declined by 1.50%.

Rising government bond yields impacted tech stocks, including Infineon Technologies, which fell 1.00%.

However, SAP rallied 2.14% on upbeat earnings and the firm’s adjusted full-year forecasts.

IMF Signals Weak Demand From China

On Tuesday, the IMF released its highly anticipated economic growth projections, with China as the focal point.

The IMF projected zero growth in Germany for 2024 (July: +0.2) and 0.8% growth for the Euro Area, down from 0.9% in July. Considering the largest economies, the IMF expects China’s economy to expand by 4.8% (July: 5.0%) while expecting US growth of 2.8% (July: 2.6%).

The IMF did not consider Beijing’s recent stimulus measures in its projections due to a lack of details. IMF Chief Economist Pierre-Olivier Gourinchas also noted that recent measures may not be sufficient to boost growth. Weaker demand from China may further impact the Euro area economy, supporting a more dovish ECB rate path.

Notably, the IMF revised its forecasts for US growth upwards from 2.6% to 2.8%. However, the Euro area faces the prospect of a Trump administration that could adversely impact trade terms between the EU and the US.

ECB Rate Path Under Scrutiny

Concerns about the euro area economy and inflation undershooting the ECB’s target raised the possibility of more aggressive ECB rate cuts.

Frederik Ducrozet, Head of Macroeconomic Research at Pictet Wealth Management, commented on ECB monetary policy, stating,

“The direction of travel is clear; the pace of rate cuts is to be determined. Not closing the door to a 50bp cut.”

Eurozone Consumer Confidence in Focus

On Wednesday, October 24, Eurozone consumer confidence figures will draw interest. Economists expect consumer confidence to improve from -12.9 in September to -12.5 in October. Unless there is a sharp improvement, the numbers will unlikely dampen expectations of ECB rate cuts to bolster the euro area economy.

Nevertheless, improving sentiment could ease concerns about a weaker consumption outlook, supporting a DAX move toward 19,650. Conversely, weaker data could drag the DAX below 19,350.

US Equity Market Overview

US equity markets had a mixed Tuesday session, with the Dow and the S&P 500 falling 0.02% and 0.05%, while the Nasdaq Composite Index advanced by 0.18%.

Rising US Treasury yields tempered buyer demand for riskier assets as recent US economic data dampened bets on a December Fed rate cut.

General Motors (GM) stood out, surging by 9.8% after beating earnings estimates and painting a rosier outlook.

US Housing Sector Outlook

On Wednesday, existing home sales data from the US will require consideration. A larger-than-expected fall could signal a deteriorating housing market, possibly impacting consumer confidence. A pullback in consumer confidence may affect spending and the US economy.

Weak data could boost bets on a December Fed rate cut, supporting a DAX move toward 19,650. On the other hand, strong data could further temper December Fed rate cut expectations, signaling a possible DAX drop below 19,350.

Near-Term Outlook

In the near term, trends will likely hinge on upcoming private sector PMIs on Thursday and ECB chatter. Weaker private sector PMI data could reinforce expectations of a December ECB rate cut. While rate cuts could boost demand for riskier assets, aggressive cuts to counter a possible inflation undershoot may adversely impact the DAX.

However, investors should also consider US economic data, stimulus-related news from China, and corporate earnings.

Futures indicate a mixed start to the Wednesday session, with the DAX futures up 9 points while the Nasdaq mini futures declined by 32 points.

Investors should stay vigilant, with corporate earnings and central bank commentary in focus. Stay informed with our latest news and analysis to manage your risks effectively.

DAX Technical Indicators

Daily Chart

Despite recent losses, the DAX remains well above the 50-day and 200-day EMAs, confirming bullish price trends.

A return to 19,500 could signal a move toward the October 17 all-time high of 19,675. A breakout from 19,675 may allow the bulls to test resistance at 19,750.

Investors should consider China’s stimulus plans, corporate earnings, and central bank speeches, which may influence near-term market sentiment.

Conversely, a fall through 19,350 could signal a drop toward 19,000 and the 50-day EMA.

The 14-day RSI at 57.94 suggests a DAX move to 19,750 before entering overbought territory.