DAX Index News: Tariff Relief and US CPI Outlook Influence Market Momentum Today

DAX Advances on US Inflation Data

US economic indicators fueled optimism ahead of Wednesday’s highly anticipated US CPI Report. Reports of Trump’s economic team considering a gradual rollout of monthly tariffs also boosted risk sentiment. However, ongoing concerns about US tariffs on EU goods remained a headwind.

On Tuesday, January 14, the DAX gained 0.69%, reversing Monday’s 0.41% loss to close at 20,271.

Auto and Bank Stocks Shine

Bank stocks led the gains on Tuesday, with Commerzbank and Deutsche Bank rallying 3.35% and 2.15%, respectively. The latest tariff-related news potentially eased concerns about the effects of US deregulation on European bank competitiveness.

The auto sector also benefitted from the tariff news. Volkswagen advanced by 1.08%, while Mercedes-Benz Group ended the session up 0.18%.

German Wholesale Prices Offer Mixed Signals

On Wednesday, January 15, German wholesale prices gave insights into the demand environment. Wholesale prices increased by 0.1% year-on-year in December after falling 0.6% in November. The rebound in wholesale prices suggested a pickup in demand, indicating an improving economy.

However, the numbers are unlikely to derail market bets on multiple ECB rate cuts. The upswing was modest, with the threat of US tariffs and weak demand from China weighing on the demand outlook.

Later today, Germany’s full year GDP numbers also require consideration. Economists expect the economy to contract by 0.2% in 2024 after contracting by 0.3% in 2023. Weaker-than-expected numbers could raise bets on multiple ECB rate cuts to bolster the Euro area economy. A more dovish ECB rate path may drive demand for rate-sensitive German stocks.

Expert Views on the Eurozone Economy

Oliver Rakau, Chief German Economist and ECB Commentator at Oxford Economics, highlighted tightening financing conditions due to higher bond yields:

“I am sure the tightening of financing conditions in the wake of higher bond yields & term premia is going to do wonders for the EZ recovery forecasted by the ECB and others.”

US Producer Prices Miss Expectations: Brief Relief?

On Tuesday, US producer prices provided markets with brief relief ahead of the crucial US CPI Report. US core producer prices rose 3.5% year-on-year in December, replicating November’s increase. Analysts projected core producer prices to rise 3.8% in December.

The softer-than-expected figures raised hopes for a market-friendly US CPI Report.

US Markets Tread Carefully Ahead of US Inflation Data

US markets had another mixed session on Tuesday, January 14, as traders considered December’s producer prices. The Dow and the S&P 500 gained 0.52% and 0.11%, respectively, while the Nasdaq Composite Index dipped by 0.23%.

10-year US Treasury yields returned to 4.80%, their highest level since November 2023, suggesting a more hawkish Fed rate path.

The US data and tariff-related reports boosted demand for the EUR/USD pair, which gained 0.62% to close at $1.03072. Despite the upswing, the EUR/USD’s near-term downward trend remains a DAX tailwind. The weaker EUR may partially offset the impact of US tariffs on the competitiveness of German goods and company earnings.

US CPI Report in Focus

Early in Wednesday’s US session, the US CPI Report could impact the Fed rate path and market risk sentiment. Economists forecast the core inflation rate to remain at 3.3% in December.

Hotter-than-expected inflation numbers could sink bets on the first half of a 2025 (H1) Fed rate cut. A more hawkish Fed rate path may raise borrowing costs, potentially impacting company earnings. Conversely, a sharp drop in core inflation may reignite market bets on a March Fed rate cut, boosting demand for rate-sensitive German stocks.

Traders should also monitor FOMC member speeches. Reactions to the US CPI Report and insights into the Fed rate path could also influence risk sentiment. 

Near-Term Outlook

The DAX’s near-term trends hinge on the US Jobs Report and central bank commentary. Hotter-than-expected US inflation data and hawkish central bank chatter could drag the DAX below 20,000. However, softer US data may push the DAX toward its record high of 20,523.

Investors should also monitor US tariff developments and stimulus-related news from China. These are key factors driving market sentiment. Fresh stimulus measures from Beijing and easing threats of US tariffs could improve the outlook for German export companies.

As of Wednesday morning, futures pointed to a tentative European open. DAX futures were up 15 points, while the Nasdaq 100 mini advanced by 26 points.

DAX Technical Indicators

Daily Chart

After Tuesday’s gains, the DAX remains comfortably above the 50-day and 200-day Exponential Moving Averages (EMAs), sending bullish price signals.

If the DAX returns to 20,350, it could enable the bulls to target the record high of 20,523 next. A break above 20,523 may signal a move toward the 20,750 level.

US inflation data, tariff developments, and central bank commentary will influence DAX trends.

Conversely, a DAX drop below 20,000 may bring the 50-day EMA and the 19,675 support level into sight.

With the 14-day RSI at 57.98, the DAX may climb to 20,523 before entering overbought territory (RSI higher than 70).

Will German Exports Soar Amid a Dovish ECB?

A dovish ECB and a weaker EUR support German exports despite global uncertainties. Economic data, central bank policy, and geopolitical developments will remain key drivers of the DAX’s performance.

Read our detailed analysis of how global market dynamics influence the DAX’s performance here.