DAX Index News: US Manufacturing PMI Eyed as DAX Reacts to German Economic Woes

Market Overview

On Monday, September 2, the DAX gained 0.13%, reversing a 0.03% loss from the previous day, closing at 18,931. Notably, the DAX dipped below 18,800 before recovering.

Key DAX Market Movers

Vonovia extended its gains from Friday, rallying 1.99%. Rising bets on an ECB rate fueled demand for real-estate stocks. Morgan Stanley also boosted buyer appetite for real-estate stocks, raising its view on EU property companies to “attractive.”

Volkswagen advanced by 1.25% as investors responded positively to plans to close factories in Germany.

However, Airbus and MTU Aero saw losses of 1.38% and 1.33%, respectively. News of Cathay Pacific commencing an inspection of its A350 fleet, following an engine component failure, fueled the sell-off.

German Manufacturing PMI Sends Recession Signals

On Monday, Germany’s Manufacturing PMI continued to signal a recession. The HCOB Manufacturing PMI fell from 43.2 in July to 42.4 in August, up from a preliminary 42.1. New orders dropped at the fastest pace in nine months, painting an even gloomier picture of the German economy.

The August PMI could pressure the ECB to cut interest rates in September to bolster the Euro area economy.

Expert Views on the German Economy

Hamburg Commercial Bank Chief Economist Dr. Cyrus de la Rubia remarked on the finalized survey, stating,

“The recession in Germany’s manufacturing sector is dragging on way longer than anyone expected. August saw an even steeper drop in incoming orders, killing off any hope for a quick bounce back. […] China seems to be the main culprit.”

The Brookings Institution Senior Fellow Robin Brooks reacted to the August PMI, stating,

“Other than COVID, you have to go all the way back to 2010 to find lower industrial production in Germany. Nothing about this is inevitable. Germany could have pushed for an energy embargo of Russia in 2022. That would have meant a short, sharp shock, not this long festering one.”

US Market Trends

On Friday, August 30, the Nasdaq Composite Index and the S&P 500 rallied 1.13% and 1.01%, respectively, while the Dow gained 0.55%.

The US markets were closed on Monday for the Labor Day holiday.

US Economic Calendar

On Tuesday, September 3, the US manufacturing sector will be in focus. Economists forecast the ISM Manufacturing PMI to increase from 46.8 in July to 47.8 in August.

Higher-than-expected numbers could support expectations of a soft landing as manufacturing accounts for over 20% of the US economy.

However, investors should consider subcomponents, including job creation rates, amid intensifying scrutiny of the US labor market. A slowdown in job creation may raise investor bets on a 50-basis point September Fed rate cut to support the labor market.

Expert Views on the US Labor Market

On Monday, The Kobeissi Letter, an industry-leading commentary on the global capital markets, stated,

“Further evidence higher unemployment is coming: US consumers’ perceptions of the labor market have weakened to the worst level since 2021. […] In previous business cycles, has been a leading indicator for unemployment. It now suggests that the unemployment rate may increase toward 5.5% in coming months. The labor market is trending toward a recession.”

Near-Term Outlook

Near-term DAX trends will depend on US Services PMI and labor market data. Moderately softer US services sector activity and labor market data raise bets on a soft US landing and a 50-basis point rate cut, possibly pushing the DAX above 19,000.

However, German Services PMI, factory orders, industrial production, and trade data also require consideration. Weak data could impact demand for DAX-listed stocks if the ECB downplays a September interest rate cut.

In the futures markets, the DAX was up by 5 points, while the Nasdaq Mini was down by 65 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 comfortably above the 50-day and 200-day EMAs, confirming the bullish price trend.

A return to Friday’s high of 18,971 could signal a move toward 19,000. A breakout from 19,000 may give the bulls a run at 19,200.

US Manufacturing sector PMI data and central bank commentary require consideration.

Conversely, a fall through 18,800 could give the bears a run at 18,750. A break below 18,750 could signal a drop toward the 18,500 level.

The 14-day RSI at 69.32 indicates a break above Friday’s high before entering overbought territory.