DAX Index Today: Private Sector PMIs, ECB Rate Cut Speculations, and Earnings

The Overview of the DAX Performance

The DAX advanced by 0.70% on Monday (April 22). Reversing a 0.56% loss from Friday (April 19), the DAX ended the session at 17,861.

Eurozone Consumer Confidence and ECB Rate Cut Plans

Consumer confidence across the Eurozone improved modestly. The Consumer Confidence Index climbed from -14.9 to -14.7 in April. Economists expected an increase to -14.0.

However, rising bets on a June ECB interest rate cut contributed to the gains. The markets expect the ECB to proceed with multiple 2024 ECB rate cuts. Investors remained optimistic despite geopolitical tensions in the Middle East and fading bets on multiple 2024 Fed rate cuts.

Robust US Economy, the Fed Rate Path, and Earnings Optimism

On Monday, US economic indicators supported expectations the US would avoid a recession. Moreover, the stats aligned with fading investor bets on multiple 2024 Fed rate cuts.

The Chicago Fed National Activity Index increased from 0.09 to 0.15 in April.

Optimism toward US corporate earnings resurfaced after the Friday (April 19) sell-off, contributing to gains across the US equity markets. The market focus will be on the Magnificent Seven, which release earnings results later this week.

On Monday, the Nasdaq Composite Index rallied 1.11%. The Dow and the S&P 500 saw gains of 0.67% and 0.87%, respectively.

The Monday Market Movers

The banking sector had a positive start to the week. Commerzbank and Deutsche Bank saw gains of 0.97% and 1.38%, respectively.

Auto stocks steadied after the Friday (April 19) sell-off. Continental AG gained 0.93%. Porsche and Volkswagen advanced by 0.53% and 0.08%, respectively. Mercedes Benz Group rose by 0.07%, while BMW ended the session flat.

Tech stocks had a mixed session. Infineon Technologies declined by 1.10%, while SAP rose by 0.18%.

Private Sector PMIs and the ECB

On Tuesday, preliminary private sector PMI numbers for Germany and the Eurozone warrant investor attention.

Economists forecast the German HCOB Manufacturing PMI to increase from 41.9 to 42.8. Moreover, economists expect the HCOB Services PMI to rise from 50.1 to 50.6.

Numbers for the Eurozone also suggest a possible shift in economic momentum. Economists predict the Eurozone HCOB Manufacturing PMI to rise from 46.1 to 46.5. Furthermore, economists forecast the HCOB Services PMI to increase from 51.5 to 51.8.

Beyond the headline figures, investors must consider prices, employment, and new orders. A pickup in input and output price pressures could test investor bets on a June ECB rate cut. Higher wages and tighter labor market conditions could draw ECB scrutiny in an improving demand environment.

With the private sector PMIs in focus, investors should monitor ECB chatter. ECB Executive Board member Edouard Fernandez-Bollo is on the calendar to speak. Views on the timeline for an ECB rate cut could move the dial.

Investors must also consider corporate earnings results.

The US Services PMI and Corporate Earnings

On Tuesday, US preliminary private sector PMIs will garner investor interest. However, the Services PMI will likely impact market risk sentiment more. The services sector accounts for over 70% of the US economy and contributes significantly to inflation.

Economists forecast the S&P Global Services PMI to increase from 51.7 to 52.0 in April. Investors should also consider the sub-components, including prices and employment. Higher input and output prices and employment could further reduce bets on a September Fed rate cut.

On the earnings calendar, General Motors (GM), PepsiCo (PEP), Tesla (TSLA), United Parcel Service (UPS), and Visa (V) are among the big names to release earnings results.

Near-Term Outlook

Near-term trends for the DAX will hinge on private sector activity, including price trends, US inflation, ECB guidance, and corporate earnings. Higher input and output prices across the euro area private sector could influence investor bets on a June ECB rate cut. However, corporate earnings results will likely have more impact on market risk sentiment.

In the futures markets, the DAX was up 121 points, while the Nasdaq mini was down 18 points.

DAX Technical Indicators

Daily Chart

The DAX hovered above the 50-day and 200-day EMAs, sending bullish price signals.

A DAX return to the 18,000 handle would support a move toward the 18,200 handle.

Private sector PMIs, the ECB, and corporate earnings results need consideration.

However, a break below the 50-day EMA would support a fall to the 17,615 support level. A drop below the 17,615 support level could bring the 17,500 handle into view.

The 14-day RSI at 46.62 indicates a DAX fall to the 17,500 handle before entering oversold territory.

4-Hourly Chart

The DAX remained below the 50-day EMA while holding above the 200-day EMA, affirming the bearish near-term but bullish longer-term price signals.

A DAX break above the 50-day EMA would support a move toward the 18,200 handle. However, the DAX must break down resistance at 18,000 to target 18,200.

Conversely, a fall through the 17,615 support level would give the bears a run at the 200-day EMA.

The 14-period 4-hour RSI at 46.68 suggests a DAX drop below the 200-day EMA before entering oversold territory.