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DAX Index Today: German Wholesale and US Producer Prices in Focus
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Key Points:
- The DAX gained 0.69% on Thursday, July 11, ending the session at 18,535.
- Softer German and US inflation figures boosted demand for DAX-listed stocks.
- On Friday, July 12, German wholesale prices and US producer prices require consideration.
In this article:
DAX Retakes the 18,500 Handle on Rate Cut Bets
On Thursday, July 11, the DAX gained 0.69%. Following a rise of 0.94% on Wednesday, July 10, the DAX closed at 18,535. Optimism toward Q3 2024 ECB and Fed rate cuts pushed the DAX higher.
The Thursday DAX Market Movers
Auto stocks extended their gains from Wednesday. Daimler Truck Holding rallied 2.25%, while BMW gained 1.68%. ECB and Fed rate cut bets fueled buyer demand for autos. A lower interest rate environment could reduce borrowing costs and bolster auto sales.
On Thursday, German inflation numbers increased investor expectations of a Q3 2024 ECB Rate cut.
German Inflation Moves Toward the ECB’s 2% Target
The German annual inflation rate fell from 2.4% in May to 2.2% in June. Softer inflation trends could allow the ECB to cut interest rates.
A recent Reuters Poll showed that 80% of economists expected the ECB to cut deposit rates in September and December.
On Friday, July 12, the German economy will remain in focus.
Can German Wholesale Prices Influence the ECB Rate Path?
Economists forecast German wholesale prices to increase 1.4% year-on-year in June after a fall of 0.7% in May.
Higher wholesale prices may test investor expectations of mu costsltiple 2024 ECB rate cuts. Economists consider wholesale prices a leading indicator of consumer inflation. Businesses could pass higher costs on to consumers.
However, the current macroeconomic environment could force firms to absorb costs and limit the impact on consumer prices.
In April, the International Monetary Fund (IMF) projected the German economy to expand by 0.2% in 2024. Weak growth could limit the ability of firms to pass costs on to buyers.
While German economic indicators need consideration, US economic indicators remains pivotal.
US CPI Report Fueled Bets on a September Fed Rate Cut
Thursday’s US CPI Report drew investor interest amidst rising bets on a September Fed rate cut.
The US core inflation rate fell unexpectedly from 3.4% in May to 3.3% in June. Softer US inflation numbers boosted investor expectations of a September Fed rate cut.
According to the CME FedWatch Tool, the probability of a September Fed rate cut increased from 73.4% on Wednesday to 88.6% on Thursday.
Wall Street Journal Chief Economics Correspondent Nick Timiraos commented on the CPI Report:
“The June CPI was far milder than expected. Core CPI rose 0.06% in June, lowering the 12-month rate to 3.27%, which is the lowest in three years. The six-month annualized rate fell to 3.3%, the lowest since October. And shelter is cooling (important).”
The jump in expectations of a Fed rate cut boosted demand for DAX-listed stocks. However, the US equity markets had a mixed Thursday session. The Nasdaq Composite Index and the S&P 500 fell by 1.95% and 0.88%, respectively, while the Dow gained 0.08%. Investors locked in profits, ending the Nasdaq’s seven-day winning streak.
On Friday, US inflation remains in focus, with producer prices in the spotlight.
Can US Producer Prices Cement a September Fed Rate Cut?
Economists expect US producer prices to increase 2.3% year-on-year in June after rising 2.2% in May. Producer prices are a leading indicator of consumer price inflation. If demand rises, producers increase prices, passing costs onto consumers.
An unexpected fall in producer prices could cement a September Fed rate cut. Rising bets on a September Fed rate cut could increase the chances of multiple 2024 Fed rate cuts. A more dovish Fed rate path may boost demand for DAX-listed stocks. Looser monetary policy supports risk appetite.
Near-Term Outlook
Near-term trends for the DAX will depend on the leading inflation indicators. Lower numbers from Germany and the US could fuel market risk sentiment. However, investors should monitor central bank reactions to the recent data, including the US CPI Report.
On the Futures markets, the DAX was up by 13 points, while the Nasdaq mini fell by 48 points.
Investors should remain vigilant, with inflation in focus. Track the news wires, economic data, 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 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. If the DAX returns to 18,750, bullish momentum could bring the 19,000 handle into view.
German and US leading inflation indicators require consideration on Friday.
Conversely, a DAX break below the 18,500 handle would bring the 50-day EMA into play. A fall through the 50-day EMA could signal a fall toward 18,000.
The 14-day RSI at 56.17 indicates a DAX 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 the 18,750 handle could signal a move toward the 19,000 handle.
However, a DAX drop below 18,500 could give the bears a run at the 50-day.
The 14-period 4-hour RSI at 60.31 indicates a DAX move to 18,750 before entering overbought territory.
About the Author
Bob Masonauthor
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.
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