DAX Index Today: Services PMIs, Producer Prices, and the ECB Rate Path

The Overview of the DAX Performance

The DAX slid by 1.09% on Tuesday (June 4). Reversing a 0.60% gain from Monday (June 3), the DAX ended the session at 18,406.

German Unemployment and the Economic Recovery

Unemployment figures from Germany affected investor hopes of a pickup in German economic activity. Unemployment increased by 25k in May after rising by 10k in April. Economists expected an increase of 10k. Nevertheless, the unemployment rate remained unchanged at 5.9%.

Weaker labor market conditions could support a less hawkish ECB rate path. However, recent inflation figures for Germany and the Eurozone created uncertainty about the Thursday interest rate decision and post-June plans.

US Factory Orders and JOLTs Job Openings

Later in the Tuesday session, factory orders advanced by 0.7% in April after rising by 0.7% in March. Economists forecast a 0.6% increase. The better-than-expected numbers contrasted with the US Manufacturing PMIs that signaled a sector contraction.

However, US labor market data impacted market risk sentiment more as investors await the US Jobs Report (Fri).

JOLTs Job Openings fell from 8.355 million to 8.059 million in April. The April figures signaled a deterioration in labor market conditions. However, job quits unexpectedly increased from 3.409 million to 3.507 million. Higher job quits suggested confidence amongst workers to find new work.

Nevertheless, the Job Openings influenced sentiment toward the Fed rate path more. 10-year US Treasury yields slid by 1.41% to 4.330% on Tuesday.

The US equity markets reacted to the US labor market data and rising investor bets on a September Fed rate cut. On Tuesday, the Dow rose by 0.36%. The Nasdaq Composite Index and S&P 500 saw gains of 0.17% and 0.15%, respectively.

The Tuesday Market Movers

Siemens Energy AG reversed gains from Monday, sliding 6.13%, with Rheinmetall AG down 3.36%.

Bank stocks also struggled amidst uncertainty about the ECB interest rate trajectory. Commerzbank and Deutsche Bank saw losses of 2.83% and 2.19%, respectively.

Auto stocks also ended the session in negative territory. BMW fell by 1.31%, with Daimler Truck Holding and Mercedes Benz Group declining by 1.02% and 1.21%, respectively. Volkswagen and Porsche saw losses of 0.74% and 0.52%, respectively.

Services PMIs and Eurozone Producer Prices

On Wednesday (June 5), finalize Services PMIs for Germany and the Eurozone warrant investor attention.

According to the preliminary surveys, the German Services PMI increased from 53.2 to 53.9 in May. The Eurozone Services PMI remained unchanged at 53.3. Upward revisions to the PMIs could test investor bets on post-June ECB rate hikes and buyer demand for DAX-listed stocks.

However, investors should also consider producer prices for the Eurozone. Economists forecast producer prices to fall 5.1% year-on-year in April after decreasing 7.8% in March. A less marked-than-expected decline could signal a pickup in demand-driven inflation. Producers pass costs onto consumers in a rising demand environment.

US ADP Nonfarm Employment and Services PMIs

Later in the Wednesday session, ADP Nonfarm Employment and ISM Services PMI numbers will attract investor attention.

Economists expect the ADP to report a 173k increase in employment in May after a 193k rise in April. Higher-than-expected numbers could temper investor bets on a September Fed rate cut.

Additionally, economists forecast the ISM Services PMI to increase from 49.4 to 50.5 in May. Better-than-forecast numbers could also affect investor expectations of a September Fed rate cut. Moreover, a more marked contraction may trigger investor fears of a hard US economic landing.

Near-Term Outlook

Near-term trends for the DAX remain hinged on Services PMIs, the ECB interest rate decision, and the US Jobs Report. A hawkish ECB rate cut, upbeat Services PMIs, and a tighter US labor market could affect buyer appetite for riskier assets.

On the Futures markets, the DAX and the Nasdaq mini were up by 80 and 51 points, respectively.

DAX Technical Indicators

Daily Chart

The DAX held above the 50-day and 200-day EMAs, confirming the bullish price signals.

A DAX break above the 18,500 handle would support a move toward the 18,650 handle.

Investors should consider the Services PMIs, Eurozone producer prices, and US labor market data.

However, a DAX drop below the 50-day EMA could signal a fall toward the 18,000 handle.

The 14-day RSI at 46.44 suggests a fall to 18,000 before entering oversold territory.

4-Hourly Chart

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

A DAX return to the 18,500 handle would support a move to the 50-day EMA. A breakout from the 50-day EMA could give the bulls a run at 18,650.

Conversely, a DAX drop below the 18,300 handle could signal a fall toward the 200-day EMA.

The 14-period 4-hour RSI at 38.21 suggests a DAX fall through the 18,300 handle before entering oversold territory.