DAX Set for a Tumble at the Open as Growth Jitters Intensify

It was another bearish session on Thursday for the DAX, falling 0.22%. Following a 0.55% loss on Wednesday, the DAX ended the day at 15,988. Significantly, the DAX saw red for the fourth consecutive session.

Concerns over the global economic outlook and a hawkish Fed Chair continued to weigh on riskier assets. A surprise Bank of England 50-basis point interest rate hike also spooked investors. Despite the risks to the UK economy, the BoE raised interest rates more than expected.

For the European markets, the BoE move highlighted the central bank’s commitment to tame inflation at all costs, raising the prospects of similar ECB moves.

Fed Chair Powell Continued to Weigh

It was another quiet European session. There were no economic indicators for Germany or from the euro area to influence.

The lack of economic indicators left the DAX in the hands of the ECB and Fed Chair Powell. Fed Chair Powell continued to weigh on riskier assets. A second day of hawkish Fed Chair Powell testimony weighed on investor sentiment. The Fed Chair stuck to the Wednesday script, expecting two further rate hikes to tame inflation.

The Market Movers

It was a bearish Thursday session for the auto sector. Mercedes-Benz Group slid by 2.30%, with Volkswagen and Porsche seeing losses of 1.62% and 1.87%, respectively. BMW and Continental AG also struggled, falling by 0.75% and 0.65%, respectively.

It was also a bearish session for the banks. Commerzbank and Deutsche Bank ended the day with losses of 1.64% and 1.44%, respectively.

The Day Ahead for the DAX

It is a busy Friday on the European economic calendar, with no economic indicators from the euro area to garner interest. The lack of economic indicators will continue to leave central banks in the spotlight.

After an extended period of alignment, ECB Executive Board members have divided views on policy goals beyond July. While ECB Chief Economist Philip Lane sees September as too far away, ECB hawk Isabel Schnabel sees doing too much rather than too little as the safer option.

With no economic indicators to consider, investors should monitor ECB commentary throughout the day. ECB Executive Board Members Fabio Panetta and Luis de Guindos are on the calendar to speak today. Investors should consider beyond July policy chatter that would move the dial.

Looking ahead to the US session, it is a busy day on the US economic calendar.

Prelim US private sector PMIs will also move the dial. We expect the services PMI to garner greater interest. However, investors should look beyond the headline figures, with employment, new orders, and inflation as the focal points.

Beyond the numbers, FOMC members will also need monitoring. FOMC members Bullard and Bostic are on the calendar to speak today.

After Fed Chair Powell’s two days of testimony, there was little change in Fed rate hike bets.

According to the CME FedWatch Tool, the probability of a 25-basis point July rate hike stood at 76.9% on Thursday versus 74.4% on Wednesday. The chances of the Fed lifting the Fed Funds Rate to 5.75% in September increased from 11.9% to 13.8%.

DAX Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bearish signals. The DAX sat below the 100-day EMA (16,004). The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through the 100-day EMA (16,004) would support a breakout from R1 (16,047) to give the bulls a run at the 50-day EMA (16,083) and R2 (16,106). However, a fall through S1 (15,870) would bring the 200-day EMA (15,807) and S2 (15,752) into view. A move through the 50-day EMA would send a bullish signal.

Resistance & Support Levels

The DAX Futures Sees Red

Across the futures markets, DAX was down 118 points, with the Dow and NASDAQ falling by 148 and 79 points, respectively.

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