Dax Index News: Will ECB Rate Cut Bets Send the DAX Higher? Outlook and Analysis

DAX Climbs Despite US Tariff Concerns

Market expectations of potential ECB rate cuts and China’s economic recovery continued to counter US tariff threats.

On Tuesday, January 21, the DAX advanced by 0.25%, following Monday’s 0.42% gain, closing at a record high of 21,042. Significantly, the DAX extended its winning streak to six sessions, underscoring market resilience amid global uncertainties.

Sector Highlights: Auto Stocks Cap Gains

Siemens Energy AG led the gains, rallying 3.31%, with Siemens Healthineers advancing by 3.22% amid a broader healthcare sector rally.

However, auto stocks suffered heavy losses amid potential US tariffs on EU goods. BMW slid by 1.79%, while Daimler Truck Holding and Volkswagen posted losses of 0.88% and 0.78%, respectively. Mercedes-Benz Group also ended the session in negative territory, while Porsche saw modest gains.

German Investor Sentiment Wanes

On January 21, Germany’s ZEW Economic Sentiment Indicator highlighted deteriorating investor morale. The Indicator dropped from 15.7 in December to 10.3 in January.

ZEW President Achim Wambach commented on the January report, stating,

“The second consecutive year of recession caused economic expectations in Germany to fall. […]A lack of private household spending and subdued demand in the construction sector continue to stall the German economy. If these trends continue in the current year, Germany will fall further behind the other countries of the Eurozone.”

Wambach also highlighted geopolitical concerns surrounding the German government and unpredictable Trump policies as compounding factors.

January’s data emphasized the need for ECB monetary easing to bolster the German and broader Euro area economies. Sentiment toward the ECB rate path continued to drive demand for German stocks.

US Markets Advance on Trump Policy Maneuvers

US markets advanced on Tuesday, January 21, boosted by US President Trump’s policy announcements. The Dow and the S&P 500 rose 1.24% and 0.88%, respectively, while the Nasdaq Composite Index gained 0.64%.

On Tuesday, President Trump announced a new joint venture (JV) called ‘Stargate,’ comprising OpenAI, Oracle (ORCL), and SoftBank. The JV will invest in US AI infrastructure, highlighting Trump’s goal of making the US a leading innovator in tech.

President Trump’s decision to delay sweeping tariffs also boosted market sentiment. Sweeping tariffs could raise import prices and inflation, potentially delaying Fed rate cuts.

In the bond markets, 10-year US Treasury yields pulled further from January 14’s high of 4.809%, driving demand for riskier assets. The retreat in yields reflected investor expectations of a more dovish Fed rate path. Lower borrowing costs may raise company earnings and valuations.

Near-Term Outlook

The DAX’s performance will hinge on inflation signals and central bank forward guidance. Higher inflation trends and hawkish central bank chatter could affect risk sentiment, potentially pulling the index toward 20,500. Conversely, softer inflation and growing support for multiple ECB and Fed rate cuts may drive the DAX toward 21,350.

External factors, including potential stimulus measures from Beijing and US-EU trade negotiations, remain critical. Beijing’s measures could bolster German exports, while punitive US tariffs risk undermining investor confidence.

As of Wednesday morning, futures pointed to a breakout European open. DAX futures were up 115 points, while the Nasdaq 100 mini jumped by 157 points.

News of Trump aiming for early renegotiations of the trade deal with Mexico and Canada raised hopes of the EU avoiding punitive tariffs.

DAX Technical Indicators

Daily Chart

After five consecutive gains, the DAX sits well above the 50-day and 200-day Exponential Moving Averages (EMAs), affirming bullish price signals.

A break above the January 20 record high of 20,955 could signal a move toward 21,350. A breakout from 21,350 may enable the bulls to target the 21,500 level next.

Central bank commentary and US tariff developments will influence DAX trends.

Conversely, a DAX break below 21,000 may indicate a drop toward 20,500, a key support level on January 16.

With the 14-day Relative Strength Index (RSI) at 74.19, the DAX remains in overbought territory (RSI higher than 70). Selling pressure may increase at Monday’s record high of 20,955.

Conclusion: Key Drivers to Watch

Rate cut optimism and global economic factors remain key drivers for the DAX. Investors must closely track inflation-related trends, ECB commentary, and geopolitical developments for further direction.

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