DAX Index Today: ZEW Data Could Signal Economic Recession and Impact the DAX

Market Overview

On Monday, August 12, the DAX advanced by 0.02%, closing at 17,727, after a 0.24% gain on Friday. Significantly, the DAX extended its winning streak to five sessions.

Monday: DAX Market Movers

• Hannover Re surged 5.23% on better-than-expected earnings, which also drove buyer demand for Munich Re Group (+1.01%)
• Rheinmetall AG extended its gains from Friday, advancing by 1.41% as investors continued responding to its earnings results.
• Auto stocks extended their losses from Friday, with BMW declining by 0.90%. Daimler Truck Holding fell by 0.87%, while Porsche ended the session down 0.57%.

German Wholesale Prices: A Glimpse into Inflation Trends

German wholesale prices declined by 0.1% year-on-year in July after falling by 0.6% in June.

Higher wholesale prices could indicate improving demand, possibly signaling an uptick in headline inflation. Wholesalers may increase prices in a rising demand environment, passing costs on to consumers. Higher inflation could reduce expectations of multiple 2024 ECB rate cuts, adversely impacting the appetite for riskier assets.

ZEW Economic Sentiment: Will Germany Face a Recession?

On Tuesday, August 13, ZEW Economic Sentiment numbers for Germany will be in focus.

Economists forecast the ZEW Economic Sentiment Index to tumble from 41.8 in July to 30.6 in August. A significant decline may fuel expectations of a German economic recession. An increasing threat of a German recession could pressure the ECB to deliver multiple 2024 rate cuts to bolster the Euro area economy.

However, a rising threat of a German recession could impact buyer demand for DAX-listed stocks.

Expert Insights: Inflation and Economic Forecasts

On Monday, Bloomberg Western Europe Economic Team Leader Zoe Schneeweiss shared a Bloomberg article reporting economists predicting the German economy will expand by just 0.1% in 2024. The ZEW Economic Sentiment Index may test expectations of 0.1% growth.

Corporate Earnings

Porsche will release its earnings results on Tuesday, which may influence the broader auto sector.

US Market Trends: Mixed Signals from Across the Atlantic

On Monday, August 12, the US equity markets had a mixed session as investors braced for the US CPI Report. The Nasdaq Composite Index advanced by 0.21%, while the Dow declined by 0.36%. The S&P 500 ended the session flat. Nvidia (NVDA) sent the Nasdaq higher.

US Economic Calendar: Producer Prices in View

On Tuesday, US producer prices could influence the Fed rate path and market risk sentiment.

Economists forecast producer prices to increase by 0.1% in July, down from 0.2% in June. Softer producer prices may indicate weaker demand, supporting multiple 2024 Fed rate cuts.

Multiple 2024 Fed rate cuts could fuel buyer demand for DAX-listed stocks as lower borrowing costs may boost corporate profits.

Expert Views on US Inflation and the US Economy

Arch Capital Global Chief Economist Parker Ross commented on the New York Fed’s Survey of Consumer Expectations, stating,

• Inflation expectations remain well-anchored.
• Consumers are increasingly worried about servicing their debt.
• Job-finding prospects continue to decline.
• Home price growth is expected to remain near-trend.

His views on the survey painted an ominous picture for those expecting a soft US economic landing.

Near-Term Outlook

Near-term DAX trends will hinge on corporate earnings, US producer and consumer price trends, and US labor market data. Softer inflation figures and a jump in US jobless claims may rekindle fears of a US hard landing. Fears of a hard landing may adversely impact buyer demand for DAX-listed stocks.

Additionally, investors should track USD/JPY trends. US recession fears could push the USD/JPY below 145, possibly triggering concerns of another Yen carry trade unwind.

In the futures markets, the DAX and the Nasdaq Mini were up by 19 and 43 points, respectively.

Investors should stay alert with corporate earnings and inflation 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 above the 200-day EMA while remaining well below the 50-day EMA, affirming bearish near-term but bullish longer-term price signals.

A break above 18,000 would support a move toward the 50-day EMA. Furthermore, a breakout from the 50-day EMA may bring 18,500 into view.

US producer prices, German ZEW Economic Sentiment data, and central bank commentary require consideration.

Conversely, a DAX break below the 17,615 support level and the 200-day EMA could give the bears a run at the 17,003 support level.

The 14-day RSI at 41.01 suggests a DAX drop to the 17,003 support level before entering oversold territory.