DAX Index Today: Bullish Streak Extends to Six Sessions Amid Rate Cut Bets

Market Overview

On Tuesday, August 13, the DAX gained 0.48%, closing the session at 17,812, after a modest 0.02% rise on Monday. Significantly, the DAX extended its winning streak to six sessions.

Tuesday: DAX Market Movers

• Hannover Re advanced by 1.67% on better-than-expected earnings results from Monday.
• Rising bets on a Fed rate cut fueled demand for tech stocks, with SAP and Infineon Technologies up by 1.20% and 0.07%, respectively.
• Auto stocks had a mixed session amid a deteriorating macroeconomic environment, with Volkswagen and Mercedes Benz Group seeing losses of 0.60% and 0.07%, respectively.

German Economic Sentiment Tumbles

Germany’s ZEW Economic Sentiment tumbled from 41.8 in July to 19.2 in August, painting a grim picture of the German economy.

ZEW President Professor Achim Wambach, PhD, commented on the August survey, stating,

“The economic outlook for Germany is breaking down. In the current survey, we observe the strongest decline of the economic expectations over the past two years. Economic expectations for the eurozone, the US, and China also deteriorate markedly.”

The ZEW Economic Sentiment data aligned with weaker economic growth forecasts.

Expert Insights: The German Economic Outlook

On Monday, Bloomberg Western Europe Economic Team Leader Zoe Schneeweiss shared a Bloomberg article reporting economists predicting the German economy will expand by just 0.1% in 2024.

Euro Area Economic Calendar

On Wednesday, August 14, Eurozone employment change, industrial production, and GDP figures will draw investor interest.

The employment change data may influence the ECB rate path more.

Economists expect employment to increase by 0.2% quarter-on-quarter in Q2 2024 after a 0.3% increase in Q1 2024.

Deteriorating labor market conditions could affect wage growth and consumer spending, supporting multiple 2024 ECB rate cuts. Lower borrowing costs could improve company profits.

US Producer Prices Boost Fed Rate Cut Odds

US producer prices increased by 0.1% in July, down from 0.2% in June, fueling bets on a Fed rate cut. Downward producer price trends may dampen demand-driven inflation, supporting a more dovish Fed rate path. Economists consider producer prices a leading indicator of headline inflation.

Rising bets on multiple Q4 2024 Fed rate cuts boosted buyer appetite for riskier assets. Lower borrowing costs may improve corporate profits and stock performances.

US Market Trends: Fed Rate Cut Hopes Fuel Rally

The US equity markets responded to the softer producer prices on Tuesday. The Nasdaq Composite Index and S&P 500 rallied 2.43% and 1.68%, respectively, while the Dow gained 1.04%.

US Economic Calendar: The CPI Report

On Wednesday, the all-important US CPI Report could further cement investor expectations of multiple 2024 Fed rate cuts.

Economists forecast the annual core inflation rate to ease from 3.2% in June to 3.1% in July.

Softer numbers could boost buyer demand for DAX-listed stocks. However, a sharp decline in consumer prices could signal a significant deterioration in demand, possibly spooking investors.

Expert Views on US Inflation and the Fed Rate Path

Arch Capital Global Chief Economist Parker Ross commented on the July producer price data from Tuesday, August 13, saying,

“This is certainly the type of inflation report the Fed wants to see and markets agree, with the 10y UST moving down to 3.88% from 3.91 at yesterday’s close. […]. Market odds of a 50bps rate cut in September rose above 60% from ~55% at yesterday’s close.”

Near-Term Outlook

Near-term DAX trends will hinge on corporate earnings, Eurozone employment data, and the US CPI Report. Softer US inflation and weaker Euro area employment data could support rate cut bets and demand for DAX-listed stocks. However, recession fears could overshadow sentiment toward central bank monetary policy.

In the futures markets, the DAX and the Nasdaq Mini were up by 46 and 13 points, respectively.

Investors should stay alert with corporate earnings and US inflation in focus. Monitor the news wires, the economic calendar, and expert commentary to manage trading strategies. Stay up-to-date with our latest news and analysis to manage risk.

DAX Technical Indicators

Daily Chart

The DAX held above the 200-day EMA while hovering below the 50-day EMA, confirming the bearish near-term but bullish longer-term price trends.

A return to 18,000 could give the bulls a run at the 50-day EMA. Furthermore, a break above the 50-day EMA may signal a move toward 18,500.

Eurozone employment, US inflation, and central bank commentary require consideration.

Conversely, a DAX drop below the 17,615 support level and the 200-day EMA could signal a fall toward the 17,003 support level.

The 14-day RSI at 43.59 indicates a DAX fall to the 17,003 support level before entering oversold territory.