DAX Index Today: Service Sector PMIs and the ECB Rate Path in Focus

The Overview of the DAX Performance

On Thursday, June 20, the DAX rallied 1.03%. Reversing a 0.35% gain from Wednesday, June 19, the DAX closed the session at 18,254.

Can Euro area and US Services PMIs green light ECB and Fed rate cuts and a DAX return to 18,500?

German Producer Prices Support Q3 2024 ECB Rate Cut

On Thursday, German producer prices attracted investor attention. Producer prices declined 2.2% year-on-year in May after a fall of 3.3% in April. Economists forecast producer prices to decrease by 2.0%.

Month-on-month, producer prices stalled after rising by 0.2% in April. Economists expected producer prices to advance by 0.3%.

The softer numbers fueled optimism toward a September ECB interest rate cut.

Eurozone Consumer Sentiment Improves Modestly

Later in the session on Thursday, the Eurozone Consumer Confidence Indicator increased from -14.3 to -14.0 in June. Economists predicted an increase to -13.6. Significantly, consumer confidence remained below its long-term average.

US Labor Market Data Shows No Signs of Weakness

After the Wednesday holiday, US jobless claims were also in focus later in the European session. Initial jobless claims declined from 243k to 238k in the week ending June 15. Economists expected initial jobless claims of 235k. The higher-than-expected claims and consumer confidence numbers supported a late move to session highs.

However, the US equity markets had a subdued return from the Wednesday holiday. The Dow gained 0.77%, while the S&P 500 and the Nasdaq Composite Index saw losses of 0.25% and 0.79%, respectively.

The Thursday Market Movers

Sartorius AG led the gains, rallying 4.58%, with Siemens Energy AG advancing by 3.14%. SAP and Infineon Technologies ended the Thursday session up 1.94% and 0.85%, respectively. Investor expectations of a September ECB rate cut drove buyer demand for tech-related stocks.

However, auto stocks continued to have mixed sessions following the rollout of EU tariffs on electric vehicle imports from China. Porsche and Volkswagen led the gains, rising by 1.06% and 0.81%, respectively. BMW bucked the trend, falling by 0.18%.

German and Eurozone Services PMIs and the ECB

On Friday, preliminary private sector PMIs for Germany and the Eurozone warrant investor attention. The Services PMIs will likely influence buyer demand for DAX-listed stocks more. The services sector contributes about 70% to the German economy and is behind the sticky inflation environment.

Economists forecast the German Services PMI to increase from 54.2 to 54.4 in June. Additionally, economists expect the Eurozone Services PMI to rise from 53.2 to 53.5.

Hotter-than-expected numbers could temper investor expectations of a Q3 2024 ECB rate cut. However, investors should consider the sub-components, including employment, new orders, and prices. Higher prices could signal higher consumer price trends and affect buyer demand for DAX-listed stocks.

Head of Macroeconomic Research, Pictet Wealth Management Frederik Ducrozet recently discussed services CPI trends, saying,

“No doubt that the last few services CPI prints have been more sticky than expected. The bumps have been driven by different factors across countries, but in all cases the noise should fade and the momentum should ease again after summer.”

Can the US Services PMI Signal a September Fed Rate Cut?

Later in the session on Friday, US private sector PMIs will also need investor consideration. Once more, the Services PMI will influence the Fed rate path more, accounting for over 70% of the US economy.

Economists forecast the US Services PMI to fall from 54.8 to 53.7. A larger-than-expected decline could raise investor bets on a September Fed rate cut and drive buyer demand for DAX-listed stocks.

However, investors should consider the employment, new orders, and prices sub-components. Upward trends in new orders, employment, and prices would signal a higher demand environment and sink bets on a September Fed rate cut.

Near-Term Outlook

Near-term trends for the DAX will hinge on Services PMIs and central bank commentary. Higher-than-expected Euro area PMIs, with upward trends in new orders and prices, could reduce investor bets on a September ECB rate cut.

On the Futures markets, the DAX was down by 2 points, while the Nasdaq mini was up by 26.

DAX Technical Indicators

Daily Chart

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

A DAX break above the 50-day EMA would support a move to 18,500. If the DAX returns to 18,500, the bulls could target 18,750.

Service sector PMIs and central bank commentary require investor attention.

Conversely, a DAX drop below the 18,200 handle could signal a fall through 18,000.

The 14-day RSI at 46.33 suggests a fall to the 17,750 handle before entering oversold territory.

4-Hourly Chart

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

A DAX break above the 50-day EMA could signal a move toward the 18,500 handle.

However, a DAX fall through the 200-day EMA could bring sub-18,000 into play.

The 14-period 4-hour RSI at 50.00 shows the DAX in a neutral position.