DAX Index News: Record Highs as ECB Rate Cut Bets Fuel Market Optimism

Market Overview

On Thursday, August 29, the DAX rose by 0.69%, following a 0.54% gain from the previous day, closing at 18,913. Significantly, the DAX struck a new all-time intraday high of 18,936.

Key DAX Market Movers

Tech stocks were among the front-runners on rising investor bets on ECB and Fed rate cuts. Infineon Technologies and SAP saw gains of 1.61% and 1.96%, respectively.

Retail stocks also moved higher, with Adidas and Zalando gaining 2.03% and 0.17%, respectively.

However, the prospect of lower interest rates impacted bank stocks, with Commerzbank and Deutsche Bank falling by 0.08% and 0.07%, respectively.

German Inflation Fuels ECB Rate Cut Bets

On Thursday, August 29, Germany’s annual inflation rate eased from 2.3% in July to 1.9% in August. Significantly, the inflation rate fell below the ECB’s 2% inflation target, fueling bets on a September ECB rate cut.

A more dovish ECB rate path could fuel buyer demand for riskier assets and boost company profits through lower borrowing costs.

Expert Views on German Inflation and the ECB Rate Path

Oliver Rakau, Chief German Economist and ECB commentator at Oxford Economics, stated,

“German headline inflation likely undershot 2% in August based on state-level data. Maybe 1.8%. I guess there might be a rate cut in September…”

Daniel Kral, Europe Macro at Oxford Economics, reacted to the inflation figures, stating,

“Where Germany’s inflation goes, the Eurozone tends to follow. Today’s drop to just below 2% (and a downside surprise in Spain) is setting up a soft Eurozone print (out tomorrow). With a drop in negotiated wages and downside risks to growth, a September rate cut seems a done deal.”

German Retail Sales and Unemployment

On Friday, August 30, German retail sales and unemployment figures will give more insights into the German economy.

Economists expect retail sales to increase by 0.1% in May after sliding by 1.2% in April. Another fall in retail sales could fuel speculation about a German economic recession. Additionally, weak consumer spending may dampen demand-driven inflation, possibly raising bets on a September ECB rate cut.

Unemployment trends will also be significant. Weaker labor market conditions may affect wage growth, reducing disposable income and personal spending.

Economists expect the unemployment rate will remain steady at 6.0 in August.

Will Eurozone Inflation Cement a September ECB Rate Cut?

Later in the European session, Eurozone inflation figures could be crucial data.

Economists forecast the core inflation rate to fall from 2.9% in July to 2.8% in June. Lower-than-expected inflation could fuel speculation about a September ECB rate cut.

Rising bets on a September ECB rate cut could boost buyer demand for DAX-listed stocks.

US GDP and Jobless Claims Support Bets on a Soft Landing

US GDP and labor market data raised hopes of a soft US economic landing. The US economy grew by 3.0% in Q2 2024, up from a preliminary 2.8%.

More significantly, US initial jobless claims fell from 233k in the week ending August 17 to 231k in the week ending August 24. The weekly data eased concerns about the labor market amidst increasing Fed scrutiny.

The lower risk of a hard US landing and expectations of a 25-basis point September Fed rate cut drove buyer demand for DAX-listed stocks. Falling borrowing costs in a robust economic environment could boost company profits and stock prices.

US Market Trends

On Thursday, the Nasdaq Composite Index declined by 0.23% due to NVIDIA (NVDA) sliding by 6.38%. However, the Dow gained 0.59%, while the S&P 500 ended the session flat.

US Economic Calendar

On Friday, the all-important US Personal Income and Outlays Report will influence the Fed rate path.

Economists forecast the Core PCE Price Index will rise by 2.7% year-on-year in July after an increase of 2.6% in June.

Hotter-than-expected inflation figures could reduce investor bets on a 50-basis point Fed rate cut. A higher-for-longer rate path could affect wage growth, disposable income, and consumer spending, possibly dampening inflation.

However, personal income and spending trends could also prove pivotal for the Fed. Softer personal income and spending could signal weaker demand-driven inflation, possibly supporting a more dovish Fed rate path.

Economists expect personal income and spending to increase by 0.2% and 0.5%, respectively, in July.

A more dovish Fed rate path could fuel buyer demand for DAX-listed stocks. However, fears of a recession could retrigger a flight to safety.

Expert Views on the US Economic Outlook and Fed Rate Path

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, remarked on the overnight US data, stating,

“US Q2 GDP revised up to 3% annualised from 2.8% w stronger consumption. Core PCE revised to 2.8% annualised from 2.9% Initial jobless claims -2k, continuing +13k July pending home sales -5.5%mom Data leaning to 0.25% Sep Fed cut rather than 0.5%.”

Near-Term Outlook

Eurozone and US inflation figures will likely dictate near-term DAX trends. Softer inflation could raise bets on September ECB and Fed rate cuts, possibly pushing the DAX through 19,000. However, investors should consider central bank comments throughout the session. Calls for patience in cutting rates could limit the upside for the DAX.

In the futures markets, the DAX was down by 33 points, while the Nasdaq Mini was up by 70 points.

Investors should stay alert with central bank speakers, and economic indicators likely influence risk sentiment. 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 well above the 50-day and 200-day EMAs, indicating bullish price trends.

A return to the Thursday high of 18,936 could support a move toward 19,000. A breakout from 19,000 could give the bulls a run at 19,200.

Eurozone inflation, the US Personal Income and Outlays Report, and central bank commentary require consideration.

Conversely, a drop below 18,800 could signal a fall toward 18,500. A drop below 18,500 could bring the 50-day EMA into play.

The 14-day RSI at 69.06 indicates a return to the all-time high of 18,936 before entering overbought territory.