Dax Index News: Will ECB’s Rate Cut Signal New Highs for the DAX?

DAX Gains on US Inflation Data: Will the ECB Trigger a Breakout?

On Wednesday, December 11, the DAX gained 0.34%, reversing a 0.08% loss from Tuesday to close at 20,399. Despite Wednesday’s gain, the DAX remained below the record high of 20,462, set on Monday, December 9.

Rising bets on a December Fed rate cut boosted demand for DAX-listed stocks.

Defense Stocks Advance on Ukraine Developments

On Wednesday, defense stock Rheinmetall AG advanced by 2.21%, with MTU Aero gaining 1.06%. Investors reacted to reports of Ukraine’s military activity targeting Russia.

Meanwhile, Siemens Energy surged 3.38%, with Vonovia advancing 2.78%, as expectations of rate cuts in Europe and the US buoyed capital-intensive sectors.

However, it was a mixed session for the auto sector. Volkswagen and Porsche posted gains, while BMW and Mercedes Benz Group closed in negative territory.

ECB Interest Rate Decision: Will President Lagarde Signal Multiple Rate Cuts?

On Thursday, December 12, the ECB will announce its final interest rate decision of 2024. Markets expect a 25-basis point interest rate cut. Investors should consider potential scenarios that may impact Dax-listed stocks.

• A larger-than-expected interest rate cut could drive the DAX to a new record high.
• An unexpected hold on interest rates may drag the DAX below 20,000.
• A 25-basis point ECB rate cut would put market focus on ECB President Lagarde’s press conference. Forward guidance will likely be key for the DAX in the this scenario.

The ECB will present its latest economic projections that will give insights into the ECB’s rate path. Softer inflation projections and lower GDP forecasts could signal aggressive ECB rate cuts, potentially driving the DAX to new highs. Conversely, the DAX could drop toward 20,000 if inflation projections suggest a cautious approach toward cutting rates.

Expert Insights on the ECB Rate Path

Robin Brooks, a Senior Fellow at the Brookings Institute, assessed the Euro area economy and the ECB’s potential interest rate path, stating,

“There is room for the ECB to decouple policy more forcefully from the Fed now, with more aggressive rate cuts helping bring a sorely needed weaker Euro.”

A weaker euro could bolster demand for Eurozone exports while lower interest rates reduce borrowing costs for businesses.

US CPI Report Cements Fed Rate Cut Bets

November’s US CPI Report solidified bets on a December Fed rate cut. The annual inflation rate rose to 2.7% in November, while core inflation remained at 3.3%. The in-line-with-expectation numbers drove demand for riskier assets.

According to the CME FedWatch Tool, the probability of a 25-basis point December Fed rate cut surged to 98.4% on Wednesday, up from 88.9% on the previous day.

US Markets Mixed: Nasdaq Hits New High on Fed Bets

US equity markets delivered mixed results on Wednesday. The Nasdaq Composite Index and the S&P 500 saw gains of 1.77% and 0.82%, respectively, while the Dow declined by 0.22%. The Dow extended its losing streak to five sessions. Demand for defensive stocks continued to wane as investors considered potential Trump policies.

Notable gainers included Tesla Inc. (TSLA) and Arm Holdings (ARM), which rallied 5.93% and 4.28%, respectively.

US Economic Calendar: Producer Prices in Focus

Meanwhile, US producer prices and jobless claims will draw investor interest in Thursday’s US session. Economists consider producer prices a leading inflation indicator.

Economists expect producer prices to increase by 2.6% year-on-year in November, up from 2.4% in October. Higher-than-expected numbers could temper bets in a Q1 2025 Fed rate cut, potentially weighing on risk sentiment. Conversely, an unexpected fall in producer prices could raise expectations of multiple Fed rate cuts, supporting demand for riskier assets.

Near-Term Outlook

In the near term, DAX trends hinge on stimulus updates from China’s Central Economic Work Conference, the ECB Press Conference, and the US data.

Fresh stimulus measures in China and ECB hints at aggressive rate cuts could drive the DAX to new record highs. Conversely, US tariff warnings, a cautious ECB, and silence on stimulus measures from Beijing could drag the DAX below 20,000.

As of Thursday morning, futures signaled a testy session ahead. DAX futures declined by 21 points, while the Nasdaq-mini futures fell by 35 points.

DAX Technical Indicators

Daily Chart

Following Wednesday’s gains, the DAX sits comfortably above the 50-day and 200-day EMAs, confirming bullish price trends.

If the DAX breaks above Monday’s record high of 20,462, it could move toward 21,750 next. Furthermore, a breakout from 20,750 may enable the bulls to target the 21,000 level.

Stimulus-related updates from Beijing, the ECB, US inflation, and US tariff-related news will influence DAX trends.

Conversely, a DAX drop below 20,150 could enable the bears to target 20,000. A fall through 20,000 may bring the 19,675 support level into play.

The DAX remains in overbought territory, with the 14-day RSI at 72.17 (> 70). Selling pressure could intensify at Monday’s all-time high of 20,462.

Explore in-depth forecasts and actionable strategies here for navigating DAX volatility.