DAX Daily Fundamental Forecast – October 25, 2016

DAX rose to its highest levels since August of this year as the European stock markets were generally cheerful and solid due to strong data emerging from the euro region. Yesterday, we saw the release of the German PMI and the manufacturing PMI rose to multi month highs of 55.1 in October against the expected value of 54.3. Likewise the services PMI came in at 54.1 against the expected value of 50.9. As can be seen, both the PMIs came in far better than what was expected and this gave a huge boost to the German stock markets and the index immediately rose through 10700 and went as high as 10822 where it met with a lot of selling and finally the DAX settled down at 10775 as of this writing.

The good mood percolated to other stock markets across Europe as well though the French PMIs came in slightly weaker than expected. The refusal of Draghi to pinpoint the exact timeline for tapering of the QE also helped the stock markets in the euro region to have a largely positive day. As we had specified, this week will be important for various major stock markets around the world as the quarterly earnings of many big companies in Germany and the US are to be released and these will certainly affect the index. The Dow Jones also closed largely positive for yesterday and we believe that this effect will continue in the euro stock markets at the open. Expect a bullish opening in the DAX as a result of this.

For today, we have the German Ifo Business Climate data that will be released during the euro session and investors will look for a continuation of the good data that has been coming out of the euro region recently. We also have Draghi speaking later on during the US session and the market will be looking for hints on when the tapering of the QE would begin and the timelines surrounding it.