Dax Index News: Mixed Forecast as US Election Risks and Fed Decisions Loom Large

DAX Declines as US Presidential Election Looms

On Monday, November 4, the DAX declined by 0.56%, partially reversing a 0.93% gain from the previous session, closing at 19,148. Uncertainty surrounding the US presidential election race affected buyer demand for DAX-listed stocks. Trump’s tariff plans continued to weigh on the DAX.

Major Stock Movers: Tech Stocks Struggle

SAP and Infineon Technologies declined by 1.36% and 0.65%, respectively. Morgan Stanley downgraded STMicroelectronics from equal weight to underweight, impacting the tech sector.

Additionally, Airbus Group and MTU Aero ended the session in negative territory, falling 1.04% and 0.26%, respectively.

However, the auto sector had a mixed session. Daimler Truck Holding and Mercedes-Benz Group advanced by 0.48% and 0.41%, respectively, while Porsche gained 0.26%. BMW and Volkswagen closed lower.

Has Germany’s Manufacturing Sector Found a Bottom?

On Monday, an upward revision to Germany’s Manufacturing PMIs provided some relief. The HCOB Manufacturing PMI increased from 40.6 in September to 43.0 in October, up from a preliminary 42.6.

Employment, new orders, and activity fell at a lesser pace, with firms less pessimistic. Nevertheless, challenges remain as high energy costs and weak demand from China may cloud the outlook.

Hamburg Commercial Bank Junior Economist Jonas Feldhusen commented on the October PMI:

“The monetary policy environment could be a small ray of hope for the manufacturing industry. The ECB cut interest rates again in October and is planning a further reduction in December. The Fed opted for a reduction of 50 basis points in September. HCOB Economics expects one further interest rate cut in the eurozone and two in the US in 2024. These measures could ease financing pressure and support demand in the export-oriented German industrial sector.”

US Factory Orders Retreat

On Monday, US factory orders indicated weakening demand, falling 0.5% in September after a 0.8% decline in August. Weaker demand could boost investor bets on a December Fed rate cut.

According to the CME FedWatch Tool, the probability of a 25-basis point December Fed rate cut slipped from 82.7% on November 1 to 81.5% on November 4.

However, uncertainty about the US presidential election left riskier assets in negative territory.

US Equity Market Overview

On Monday, November 4, US equity markets ended the session in negative territory. The Dow dropped 0.61%, with the Nasdaq Composite Index and the S&P 500 falling 0.33% and 0.28%, respectively.

The election polls highlighted the uncertainty ahead of the US presidential election, affecting demand for riskier assets.

According to AtlasIntel, Trump led Kamala Harris by 1.1 points on November 4, contrasting with FiveThirtyEight, which showed Harris leading by 1.2 points.

US Services Sector in Focus

In Tuesday’s US session, the crucial ISM Services PMI requires consideration. Economists expect the Services PMI to drop from 54.9 in September to 53.8 in October. A fall toward 50 could signal a deteriorating US economy as the services sector accounts for around 80% of GDP. Fears of a hard US economic landing could impact buyer demand for DAX-listed stocks.

Conversely, a modest decline might increase expectations for a December Fed rate cut, supporting the DAX at current levels.

US Presidential Election The Key Driver

While investors may consider the PMI data, the US Presidential Election remains the primary driver. A Trump lead could pull the DAX below 19,000, while a Harris lead may drive the DAX toward 19,350.

Markets expect trade wars to affect global trade, potentially stalling a German economic recovery and impacting German firms dependent on US demand.

Near-Term Outlook

In the near term, DAX trends will hinge on the US Presidential Election and the upcoming Fed decision. Importantly, a Trump victory and indications of a Fed policy hold in December could dampen demand for DAX-listed stocks. Conversely, a Harris win and Fed support for a December Fed rate cut may drive the DAX toward its all-time high.

Futures indicate a mixed start to the Tuesday session. DAX futures were down 18 points, while the Nasdaq mini futures advanced by 19 points.

Investors should monitor the US presidential election and economic data closely. Stay informed with our latest news and analysis to manage your risks effectively.

DAX Technical Indicators

Daily Chart

Despite Monday’s loss, the DAX remains above the 50-day and 200-day EMAs, affirming bullish price signals. However, a drop below these levels could shift sentiment to bearish.

A break above 19,350 could support a move toward 19,500. Furthermore, a breakout from 19,500 may bring the all-time high of 19,675 into play.

Investors should consider today’s US ISM Services PMI, US Presidential Election-related news, and central bank chatter, which will likely affect market sentiment.

Conversely, a DAX break below the 50-day EMA and 19,000 could allow the bears to target the 18,750 level.

The 14-day RSI at 46.56 suggests a possible drop to 18,750 before entering oversold territory.