DAX Set for a Testy Tuesday on Disappointing Trade Data from China

Highlights

• It was a choppy start to the week for the DAX on Monday, falling 0.01% to wrap up the day at 15,951.
• German industrial production figures sent the DAX into the red before an afternoon recovery.
• Trade data from China set the tone this morning as investors look toward inflation numbers from China on Wednesday and the US on Thursday.

It was a bearish Monday for the DAX, which slipped by 0.01%. Following a 0.37% gain on Friday, the DAX ended the day at 15,951. Significantly, the DAX ended the day at sub-16,000 for the third consecutive session.

Economic indicators from Germany weighed on investor sentiment, while Fed chatter and gains across the US equity markets provided support.

FOMC member John Williams talked about rate cuts in 2024 if inflation softens. In contrast, FOMC member Michelle Bowman said more rate hikes will likely be needed. However, as vice chair of the Fed, Williams has more influence on the markets.

The NASDAQ Composite Index rose by 0.61%. On Monday, the Dow and the S&P 500 saw gains of 1.16% and 0.90%, respectively.

German Economic Indicators Flash Red

It was a relatively busy day on the European economic calendar, with German industrial production in focus. After a 7.0% surge in factory orders in June and a 6.2% jump in May, the markets were likely expecting a boost in production.

However, industrial production tumbled by 1.5% in June, following a 0.1% decline in May. Economists forecast a 0.5% fall.

The Eurozone Sentix Index provided some comfort, rising from -22.5 to -18.9 in August. Economists forecast a decline to -24.3. However, there was no support for the DAX, with Germany’s Index falling for the fourth consecutive month to -30.7.

There were no US economic indicators to provide direction.

The Market Movers

It was another mixed session for the auto sector. Porsche fell by 0.42%, with BMW and Volkswagen seeing losses of 0.33% and 0.22%, respectively. Mercedes-Benz Group also struggled, declining by 0.14%, while Continental AG gained 0.28%.

It was also a mixed session for the banks. Commerzbank slid by 3.56%, while Deutsche Bank ended the day up 0.40%. Commerzbank was the worst performer on Friday.

Siemens Energy was the worst performer on Monday, tumbling by 6.14%, followed by Commerzbank. A $2.4 billion wind turbine unit hit, and a net loss of €4.5 billion fueled the Siemens Energy sell-off.

The Day Ahead for the DAX

Trade data from China set the tone ahead of the European opening bell. Exports from China tumbled by 14.5% in July versus a 12.4% decline in June. Imports slumped by 12.4% versus a more modest 6.8% fall in June. Economists forecast exports to fall by 9.8% and imports to decline by 5.6%. The dollar trade surplus widened from $70.62 billion to $80.60 billion.

From the euro area, finalized inflation figures from Germany and trade data from France will draw interest. Revisions to the inflation numbers from Germany will likely have more impact on the DAX.

Later today, US trade data and Fed Chatter will move the dial. FOMC members Harker and Barkin are on the calendar to speak today. We expect the Fed commentary to have more influence as investors await the US CPI Report, out on Thursday.

DAX Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bearish signals. The DAX sat below the 50-day (16,093) and 200-day (15,961) EMAs, sending bearish near and longer-term price signals.

Significantly, the 50-day EMA narrowed to the 200-day EMA, sending bearish price signals and supporting a DAX return to sub-15,750 to bring the 15,600 – 15,525 support band into play.

However, a DAX move through the 200-day EMA (15,961) and the lower level of the 16,000 – 16,080 resistance band would give the bulls a run at the 50-day EMA (16,093).

The 14-4H RSI sits at 41.58, signaling bearish sentiment, with selling pressure overweighing buying pressure. Significantly, the RSI aligns with the EMA, supporting a return to sub-15,750 to bring the 15,600 – 15,525 support band into play.

For a look at the economic events, check out our economic calendar.