DAX Index News: Strong Market Performance Ahead of Crucial German Business Sentiment Data

Market Overview

On Friday, August 23, the DAX rallied 0.76%, following a 0.24% gain from the previous day, closing at 18,633.

Key DAX Market Movers on Friday

Siemens Energy rallied 2.71%. Heidelberg Materials and Vonovia, from the materials and real estate sectors, gained 1.84% and 1.83%, respectively. Demand surged over rising expectations of September ECB and Fed interest rate cuts.

Auto stocks also advanced on Friday, with BMW and Daimler Truck Holding advancing by 1.49% and 1.08%, respectively.

ECB Policymaker Support Builds for September Rate Cut

On Friday, reports of increasing ECB policymaker support for a September rate cut drove buyer demand for DAX-listed stocks.

Latvian central banker Martinas Kazaks reportedly said,

“Our June projections assumed two more rate cuts this year and right now I don’t see any reason why we shouldn’t follow through.”

Lower interest rates could reduce borrowing costs, boosting company profits and increasing demand for rate-sensitive stocks.

German Business Sentiment in Focus

On Monday, August 26, the Ifo Business Climate Index will draw investor interest. Economists forecast the Index to drop slightly from 87.0 in July to 86.5 in August.

A larger-than-expected fall may raise expectations of a possible September ECB rate cut. Deteriorating business sentiment may affect investment, job creation, and wage growth. Softer wage growth may dampen consumer spending and demand-driven inflation.

Expert Views on the Eurozone Economy and ECB Rate Path

Pictet Wealth Management Head of Macroeconomic Research Frederik Ducrozet commented on Thursday’s softer wage growth figures, stating,

“Euro area wage growth: noise on the way up (German bonuses in Q1), noise on the way down. But the trend looks just fine. The ECB should lose no time in dialing back its restrictive stance.”

Brookings Institute Senior Fellow Robin Brooks stated,

“The global economy is clearly weakening. Germany is one of the world’s biggest exporters. Its new export orders in the flash PMI for August 2024 fell very sharply and is approaching levels in late 2022 right after Russia invaded Ukraine. The Euro zone is heading for a double dip.”

Fed Chair Powell Signals Policy Shift

On Friday, Fed Chair Powell signaled a Fed rate cut, boosting demand for DAX-listed stocks. At the Jackson Hole Symposium, Powell noted the need to adjust the Fed’s policy and raised concerns about further weakness in the labor market.

Expert Views on Fed Chair Powell’s Speech and Fed Rate Path

Wall Street Journal Chief Economics Correspondent Nick Tomiraos remarked on Powell’s speech, stating,

“While Powell was forceful in laying out the Fed’s goals, he offered no specifics about the precise way officials will deliver them to retain maximum discretion. In doing so, Powell’s silence kept the door open to larger rate cuts if the labor market shows signs of greater weakness in the weeks ahead.”

US Market Trends

On Friday, August 23, 10-year US Treasury yields dropped, fueling demand for riskier assets. The Nasdaq Composite Index rallied 1.47%, while the Dow and the S&P 500 saw gains of 1.14% and 1.15%, respectively.

US Economic Calendar

On Monday, US durable goods orders could give investors insight into the demand environment.

Economists predict a 4.0% increase in durable goods orders in July after sliding by 6.6% in June. A rebound could ease fears of a hard US landing. However, the numbers may have a limited influence on the Fed rate path due to the focus on the labor market and inflation.

Near-Term Outlook

Near-term DAX trends will hinge on inflation numbers from Germany (Thurs) and the US Personal Income and Outlays Report (Fri).

Softer inflation numbers and a drop in US personal spending could reinforce expectations of September ECB and Fed rate cuts. Rising bets on September rate cuts could push the DAX toward 19,000. However, if US economic indicators retrigger fears of a US recession, the DAX could fall below 18,000.

In the futures markets, the DAX and the Nasdaq Mini were down by 33 and 63 points, respectively.

Investors should stay alert, with central bank speakers and economic indicators likely to 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 sat comfortably above the 50-day and 200-day EMAs, confirming the bullish price trends.

A break above 18,750 could support a move toward the all-time high of 18,893. Furthermore, a return to 18,893 could give the bulls a run at 19,000.

German and US data and central bank speeches require consideration.

Conversely, a fall through 18,500 could give the bears a run at the 50-day EMA. A break below the 50-day EMA could signal a fall toward 18,000.

The 14-day RSI at 63.24 indicates a return to the all-time high of 18,893 before entering overbought territory.