DAX Index Today: Eyes on US Jobs Report and French Election Run-Off

Friday could be a pivotal session for the DAX, with the US Jobs Report and French Election run-off-related updates in focus.

Will the US Jobs Report greenlight a September Fed rate cut and a move toward 19,000 for the DAX?

The DAX Performance Overview

On Thursday, July 4, the DAX advanced by 0.41%. Following a 1.16% rally on Wednesday, July 3, the DAX closed the session at 18,451.

France Election Watch: Polls Project 199 Seats for Le Pen

With the French Election run-off looming, the latest polls gave the far-right the lowest projection since the first round.

EurAsia Group Managing Director Europe Mujtaba Rahman shared the latest poll projections, saying,

“This is the lowest projection for the far right/Le Pen in this Sunday’s French election so far. National Rally on 199 (range = 148-212 seats)”

On Wednesday, July 3, the polls had projected 220 seats for Le Pen. The downward trend in projections showcased the success of the centralists and the left ending the chances of a National Rally Party government.

Averting a far-right absolute majority remains crucial for the DAX and the broader European equity markets.

Will the markets accept the poll projections or get nervous as the European session nears its close?

Amidst the political negotiating in France, economic indicators from Germany sent more bad news.

German Factory Orders Slide as Overseas Demand Crumbles

German factory orders slid by 1.6% in May after a 0.6% decline in April. While the manufacturing sector is not an immediate ECB concern, the latest numbers from Germany may cause concern.

For context, factory orders fell for the fourth time in five months in May, highlighting the weak demand environment.

Meanwhile, investor bets on a September Fed rate cut continued to drive buyer demand for DAX-listed stocks. Weaker US labor market conditions and an unexpected contraction in the US Services sector could give the Fed doves the upper hand in steering monetary policy.

There were no US economic indicators for investors to consider on Thursday, with the US markets closed for the Fourth of July holiday.

The Wednesday Market Movers

Continental AG surged 9.54% on expectations of strong growth in China and a likely boost in Q2 2024 profits.

The broader German auto sector benefited from the news. Volkswagen and Mercedes Benz Group saw gains of 1.03% and 0.98%, respectively. Daimler Truck Holding rose by 0.77%, while Porsche gained 0.52%.

Easing fears of a far-right absolute majority in France drove buyer demand for bank stocks. A far-right absolute majority could disrupt the Euro area economy and EU project stability. Deutsche Bank rose by 0.80%, while Commerzbank gained 0.62%.

German Industrial Production: Another Red Flag?

Moving on to the Friday, July 5, session, the German manufacturing sector will be in focus again.

Economists forecast industrial production to increase by 0.2% in May after falling by 0.1% in April.

Considering factory order number trends, the outlook looks grim for production.

For perspective, industrial production only increased in two of the last twelve months.

Nevertheless, the ECB appears more concerned with wage growth and inflation than the German economy.

The interest in wage growth and inflation could give Eurozone retail sales figures more weight.

Eurozone Retail Sales Rebound Could Test ECB Rate Cut Bets

Economists forecast Eurozone retail sales to increase by 0.2% in May after falling by 0.5% in April.

Upward trends in retail sales could fuel demand-driven inflation and delay the timing of an ECB rate cut.

For context, retail sales trends generally support an ECB rate cut. However, inflation driven by the services sector remains a significant concern.

While economic data from the Euro area warrant investor attention, US labor market data could be pivotal for the DAX.

US Jobs Report and the Fed Interest Rate Path

The crucial US Jobs Report will attract investor attention on Friday. Softer-than-expected US labor market data could fuel investor bets on a September Fed rate cut and buyer demand for DAX-listed stocks.

Economists forecast nonfarm payrolls to increase by 190k in June after a 272k rise in May. Additionally, economists expect the US unemployment rate to remain unchanged at 4.0%.

A steady unemployment rate could direct investor focus to the wage growth numbers. On Tuesday, July 2, Fed Chair Powell stated that wage growth remained elevated. Softer-than-expected numbers could ease Fed concerns about wage growth.

Economists forecast average hourly earnings to increase 3.9% year-on-year in June after a rise of 4.1% in May.

Notably, wage growth had softened to 4.0% in April before rising the following month. The focus on wage growth is understandable. Upward trends in wage growth could increase disposable income and fuel consumer spending and demand-driven inflation.

With the US Jobs Report in focus, it could be a choppy end to the European session.

Near-Term Outlook

Near-term trends for the DAX will hinge on French election-related news and the US Jobs Report. Downward trends in the poll projections for National Rally Party seats and a soft US Jobs Report could support buyer appetite for DAX-listed stocks.

On the Futures markets, the DAX was down by 9 points, while the Nasdaq mini gained 8 points.

In conclusion, French Election polls project that the National Rally Party will fall short of an absolute majority, which is positive for the DAX. The US Jobs Report will dictate the Fed interest rate trajectory with rising bets on a Fed rate cut also DAX positive.

Investors should monitor the news wires, real-time economic data, and expert commentary to manage trading strategies accordingly. Stay informed with our latest updates and insights to navigate the equity markets effectively.

To better navigate these market conditions, understanding the technical indicators for the DAX is crucial. Here is a look at the key technical levels and trends.

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 the 18,750 handle.

Investors should pay close attention to the French Election-related news and the US Jobs Report.

Conversely, a DAX break below the 50-day EMA could bring 18,000 into play. A fall through 18,000 could signal a drop toward the 17,615 support level.

The 14-day RSI at 54.52 suggests a return to the 18,750 handle before entering overbought territory.

4-Hourly Chart

The DAX sat comfortably above the 50-day and 200-day EMAs, confirming the bullish price trends.

A return to 18,500 could give the bulls a run at the 18,750 handle.

However, a DAX drop below the 50-day and 200-day EMAs could signal a fall through the 18,000 handle.

The 14-period 4-hour RSI at 62.68 indicates a DAX move to 18,750 before entering overbought territory.