DAX Index Today: German Industrial Production and Trade Data in Focus

Market Overview

On Tuesday, August 6, the DAX gained 0.09%. Partially reversing a 1.82% loss from Monday, August 5, the DAX closed at 17,354.

Tuesday: DAX Market Movers

• Siemens Energy AG rallied 3.34%, with SAP up 2.31% as the global equity markets began recovering from the Yen carry trade unwind.
• Auto stocks continued to trend lower, limiting the gains despite a jump in German factory orders.
• Porsche declined by 1.13%, with Volkswagen falling 0.87%.

German Factory Orders Surge

German factory orders surged by 3.9% in June after falling by 1.7% in May. Better-than-expected orders raised hopes for an economic pickup in H2 2024.

However, Oxford Economics Chief Economist and ECB Commentator Oliver Rakau, poured cold water on the numbers, remarking,

“I might not have been close but my forecasted 2% gain for German factory orders was much closer than consensus. A surge in car orders & a big ammunition order helped. But both look set to reverse next month. Core orders are broadly stagnant at historic lows. Get on with it ECB.”

Factory orders may need to trend higher in July to signal a shift in Germany’s economic momentum.

German Industrial Production and Trade

On Wednesday, August 7, the German economy will be under the spotlight.

Economists forecast German industrial production to increase by 1.0% in June after a 2.5% fall in May.

Better-than-expected numbers could signal a demand pickup. However, German trade data could influence sentiment more.

Economists expect German exports to fall by 1.5% in June, following a 3.6% decline in May. A larger fall in exports could impact DAX-listed export stocks.

German Manufacturing PMI Signals July Pullback

Germany’s HCOB Manufacturing PMI fell from 43.5 in June to 43.2 in July, signaling weaker demand conditions. Output and new orders continued to fall, suggesting any pickup in factory orders and industrial production could be short-lived.

Expert Views on the German Economy

Hamburg Commercial Bank Chief Economist Dr. Cyrus de la Rubia commented on the July Manufacturing PMI survey and Germany’s economy, saying,

“Due to the sharp drop in production and new orders, we’re revising our growth forecast down. With manufacturing being so crucial to Germany’s economy (accounting for 22.6% of gross value added), we are now expecting the overall economy to grow by just 0.2% this year, down from our previous forecast of 0.5%.”

Corporate Earnings

On Wednesday, Siemens Energy AG, Commerzbank, and Continental AG will release earnings reports. The results and forward guidance will likely influence DAX trends more than the economic data.

US Economic Data

On Tuesday, August 6, the RCM/TIPP Economic Optimism Index advanced from 44.2 in July to 44.5 in August, easing fears of a US recession.

The Index gauges consumer sentiment toward the economy, the labor market, inflation, and personal financials. The better-than-expected Index could indicate a pickup in consumer spending. Private consumption contributes over 60% to the economy.

US Market Trends

On Tuesday, August 6, the US equity markets ended the session in positive territory. The Nasdaq Composite Index and the S&P 500 saw gains of 1.03% and 1.04%, respectively, while the Dow advanced by 0.76%.

Dip buyers contributed as the USD/JPY advanced by 0.11%, with the softer Yen calming immediate fears of another Yen carry trade unwind.

Expert Views on the US Economy

Arch Capital Global Chief Economist Parker Ross commented on consumer credit trends, stating,

“Fewer net banks were tightening consumer loan standards in July vs April, with Auto loans back to roughly unchanged standards on net. Accordingly, bank willingness to make consumer installment loans moved back to net neutral for the first time since 3Q22.”

Bank credit standards can be a leading indicator of the US economy. Banks tighten credit standards in a deteriorating macroeconomic environment.

US Economic Calendar

On Wednesday, investors should consider FOMC Member commentary. Views on the US economic outlook, inflation, the labor market, and the Fed rate path need consideration.

Concerns about an economic recession and the need for multiple 2024 Fed rate cuts could impact buyer demand for riskier assets.

Near-Term Outlook

Near-term DAX trends hinge on corporate earnings, the economic data, and central bank commentary. Corporate earnings would likely have more impact on the DAX than the June data from Germany.

However, investors should also consider Fed support for aggressive rate cuts to bolster the US economy. Aggressive rate cuts would narrow interest rate differentials between the US and Japan, risking another Yen carry trade unwind.

In the futures markets, the DAX and the Nasdaq mini were up by 223 and 222 points, respectively.

Bank of Japan Deputy Governor Uchida Shinichi spoke on Wednesday, boosting demand for riskier assets. The USD/JPY rallied 2.22% to 147.492 on assurances the BoJ would maintain monetary policy easing with the current policy interest rate in the near term.

Investors should remain vigilant with corporate earnings and crucial economic data releases 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 hovered below the 50-day and 200-day EMAs, affirming bearish price signals.

A break above the 200-day EMA and the 17,615 resistance level would support a move toward 18,000. Furthermore, a breakout from 18,000 could give the bulls a run at the 50-day EMA.

Corporate earnings, German economic indicators, and central bank commentary require consideration.

Conversely, a DAX break below 17,350 could signal a fall toward the 17,003 support level.

The 14-day RSI at 30.31 suggests a DAX drop below 17,350 before entering oversold territory.

4-Hourly Chart

The DAX remained well below the 50-day and 200-day EMAs, confirming the bearish price trends.

A breakout from the 17,615 resistance level could signal a move toward 18,000. A break above 18,000 could give the bulls a run at the 50-day EMA.

However, a DAX break below 17,350 could bring the 17,003 support level into play.

The 14-period 4-hour RSI at 26.40 shows the DAX sitting in oversold territory. Buyer pressure may increase at the 17,003 support level.