DAX Index Today: Eurozone and US Inflation Put the ECB and the Fed in Focus

The Overview of the DAX Performance

The DAX gained 0.13% on Thursday (May 30). Partially reversing a 1.10% loss from Wednesday (May 29), the DAX closed the session at 18,497.

Eurozone Unemployment and Economic Sentiment Send Positive Signals

The Eurozone unemployment rate unexpectedly fell from 6.5% to 6.4% in April. Tighter labor market conditions could support wage growth, consumer spending, and demand-driven inflation.

The Economic Sentiment Index for the Eurozone increased from 95.6 to 96.0 in April, signaling an improving economic outlook.

Uncertainty about post-June ECB rate cuts and the Eurozone data tested buyer appetite for DAX-listed stocks.

However, US economic data supported a reversal of early losses.

US Economy Loses Momentum, Dragging Treasury Yields South

The US economy grew by 1.3% in Q1 2024 after expanding by 3.4% in Q4 2023. Corporate profits fell, with consumer spending trending lower, signaling a shift in economic momentum.

Additionally, US initial jobless claims increased from 216k to 218k in the week ending May 25.

10-year US Treasury yields slid by 1.43%, with German government bond yields also lower, supporting buyer appetite for DAX-listed stocks.

Nevertheless, the Nasdaq Composite Index slid by 1.08%. The Dow and S&P 500 saw losses of 0.86% and 0.60%, respectively.

The Thursday Market Movers

Auto stocks had a mixed session. Porsche and BMW saw gains of 1.21% and 0.85%, respectively. Mercedes Benz Group advanced by 0.70%. However, Volkswagen tumbled 5.22%.

Retail-related stocks extended their gains from the Wednesday session. Zalando SE and Adidas advanced by 0.66% and 1.94%, respectively. Improving sentiment toward the euro area economy contributed to the gains.

German Retail Sales and Eurozone Inflation in Focus

On Friday (May 31), German retail sales will warrant investor attention. A larger-than-expected fall in retail sales could signal a damper inflation outlook. A softer inflation outlook could support post-June ECB rate cuts and buyer appetite for DAX-listed stocks.

Economists forecast German retail sales to fall by 0.1% in April after surging 1.8% in March.

However, inflation figures for the Eurozone will likely impact the DAX more. Higher-than-expected inflation numbers could sink hopes of post-June multiple ECB rate cuts.

Economists forecast the annual inflation rate to rise from 2.4% to 2.5% in April.

With inflation in focus, ECB member commentary also needs consideration. Reactions to the inflation number could influence market risk sentiment.

US Core PCE Price Index in the Spotlight

Later in the Friday session, the heavily anticipated US Personal Income and Outlays Report will attract investor attention.

Hotter-than-expected inflation numbers and upward personal income/spending trends could sink investor bets on a September Fed rate cut.

Economists forecast the US Core PCE Price Index to increase 2.8% year-on-year in April after advancing 2.8% in March.

Furthermore, economists expect personal income and spending to rise by 0.3% in April. Personal Income increased by 0.5% in March, with personal spending rising by 0.8%.

Near-Term Outlook

Near-term trends for the DAX will hinge on the Eurozone and US inflation numbers. Hotter-than-expected inflation numbers could impact the ECB and Fed rate paths and buyer demand for DAX-listed stocks.

On the Futures markets, the DAX and the Nasdaq mini were down 37 and 50 points, respectively.

DAX Technical Indicators

Daily Chart

The DAX remained above the 50-day and 200-day EMAs, affirming the bullish price signals.

A DAX breakout from the 18,500 handle could signal a move to 18,650. A break above the 18,650 handle could give the bulls a run at 18,700.

Eurozone inflation and the US Personal Income and Outlays Report need consideration.

However, a DAX break below the 50-day EMA could bring the 18,000 handle into play.

The 14-day RSI at 50.30 indicates a return to 18,800 before entering overbought territory.

4-Hourly Chart

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

A DAX move through the 50-day EMA could bring the 18,650 handle into play.

Conversely, a DAX fall through the 18,400 handle could signal a drop toward the 200-day EMA.

The 14-period 4-hour RSI at 39.12 indicates a DAX break below the 18,400 handle before entering oversold territory.