Dax Index: Sliding Amidst Rising Bond Yields and a Gloomy Manufacturing Outlook

Highlights

• DAX plummeted 0.91% on Monday, ending at 15,247, overturning a previous 0.41% gain.
• Deutsche Bank and Commerzbank decline, witnessing stark Monday losses.
• US JOLTS Report potentially pivoting investor appetite and Fed trajectory.

DAX Monday Overview

On Monday, the DAX slid by 0.91%. Reversing a 0.41% gain from Friday, the DAX ended the day at 15,247.

German Manufacturing Sector Continues to Struggle

In September, the German Manufacturing PMI increased from 39.1 to 39.6, down from a prelim 39.8. Manufacturing sector woes across Germany and the broader euro area continued to signal a Eurozone recession.

The Eurozone Manufacturing PMI slipped from 43.5 to 43.4.

Amidst the gloomy economic backdrop, government bond yields climbed higher, pressuring riskier assets.

Late in the European session, US economic indicators further pressured the DAX. The US ISM Manufacturing PMI beat forecasts, supporting the more hawkish Fed interest rate trajectory.

FOMC member Michelle Bowman supported further monetary policy tightening to tame inflation, saying,

“I remain willing to support raising the federal funds rate at a future meeting if the incoming data indicates that progress on inflation has stalled or is too slow to bring inflation to 2% in a timely way.”

The US equity markets had a mixed start to the fourth quarter. The NASDAQ Composite Index and the S&P 500 gained 0.67% and 0.01%, while the Dow fell by 0.22%.

The Monday Market Movers

Deutsche Bank and Commerzbank were among the worst performers, falling 3.20% and 2.55%.

However, auto stocks had a mixed session. Continental gained 0.72%, with Volkswagen rising by 0.06%. BMW and Mercedes-Benz Group saw losses of 0.22% and 0.42%, respectively, while Porsche ended the day flat.

ECB Inflation and Monetary Policy in Focus

After the disappointing start to the fourth quarter, the market focus will turn to the ECB.

ECB Chief Economist Philip Lane will deliver a speech and participate in a panel discussion on inflation and the ECB response.

Hawkish forward guidance on interest rates and a gloomy economic outlook would test buyer appetite. The Eurozone economy remains at risk of an ECB-fueled economic recession. A higher interest rate environment will likely continue to impact demand and profit margins for German companies.

US JOLTS Job Openings and the Fed in the Spotlight

Later today, the US JOLTs Job Openings Report will influence investor appetite for riskier assets. A marked increase in job openings would support a more hawkish Fed interest rate trajectory.

Economists forecast job openings to fall from 8.827 million to 8.800 million in August.

Beyond the numbers, FOMC member commentary also needs consideration. FOMC member Raphael Bostic is on the calendar to speak today. Talk of further rate hikes to tame inflation would drive US Treasury yields higher and pressure the appetite for riskier assets.

The DAX and NASDAQ mini were down 93 and 26 points this morning.

Short-Term Forecast

The threat of a higher-for-longer interest rate environment across the euro area and the risk of a recession remain headwinds. An increased chance of a Fed rate hike will likely add further downward pressure on the DAX.

DAX Technical Indicators

Daily Chart

The DAX remained below the 50-day and 200-day EMAs, affirming bearish price signals. A break below the 15,245 support level would bring the 15,058 support level into play.

Hawkish ECB and Fed comments and a rise in US job openings would weigh on buyer appetite.

However, a less hawkish ECB Chief Economist and softer US job openings may fuel buyer demand. A return to 15,300 would support a move to the 15,459 resistance level and the 200-day EMA. However, selling pressure will likely intensify at the 15,460. The 200-day EMA is confluent with the 15,459 resistance level.

The 14-Daily RSI reading of 35.27 supports a DAX fall below the 15,245 support level before entering oversold territory.

4-Hourly Chart

The DAX, remaining below the 50-day and 200-day EMAs, reaffirms bearish price signals. A DAX return to 15,400 would support a break above the 15,459 resistance level.

However, a drop below the 15,245 support level would give the bears a run at the 15,058 support level.

The 38.67 RSI reading supports a DAX fall below the 15,245 support level before entering the oversold territory.

For a look at the economic events, check out our economic calendar.