DAX Index: ECB President Lagarde in Focus as Monetary Policy Debates Dominate

Highlights

• The DAX declined by 0.11% on Monday, ending a five-day winning streak.
• Bayer tumbled 17.6%, leaving the DAX in negative territory.
• On Tuesday, ECB commentary and US economic indicators are focal points.

Monday DAX Overview

The DAX declined by 0.11% on Monday. After a 0.84% gain on Friday, the DAX ended the day at 15,901.

German Producer Prices Reflect Improving Demand

German producer prices declined at a less marked pace, suggesting an improving demand environment. Producer prices were down 11.0% in October year-over-year versus -14.7% in September.

However, the numbers had a limited impact on buyer demand. The markets were in a cautious mood. A five-day winning streak fueled by bets on ECB and Fed rate cuts left the DAX at the door of 16,000. This week, central bank speeches and monetary policy meeting minutes could provide further insights into the policy outlook.

Bayer Sends the DAX into Negative Territory

On Monday, German pharmaceutical giant Bayer tumbled 17.6%. Investors reacted to a weekend report of Bayer stopping its OCEANIC-AF study because of lack of efficacy.

US Treasury Yields Limit the Damage

10-year US Treasury yield headed south on Monday, providing late support. Yields ended the Monday session down 0.34% to 4.424%.

On Monday, the US equity markets ended the session in positive territory. The Nasdaq Composite Index gained 1.13%, with the Dow and S&P 500 ending the day up 0.58% and 0.74%, respectively.

The Monday Market Movers

Siemens Energy AG was among the front runners, gaining 2.05%, with the government deal continuing to fuel buyer demand.

Bank stocks also made gains, with Deutsche Bank and Commerzbank rising by 1.04% and 0.72 %, respectively.

Market sentiment toward ECB and Fed monetary policy outlooks remained a tailwind for the auto sector. Porsche rose by 1.19%, with BMW and Mercedes Benz Group gaining 0.57% and 0.56%. Daimler Truck Holding ended the day up 0.65%, while Volkswagen ended the session flat.

ECB Commentary in the Spotlight

On Tuesday, ECB President Lagarde is on the calendar to speak. Previously, the ECB President said there would be no rate cut discussions for the next two quarters. A Lagarde shift to a more dovish stance could support buyer demand for DAX-listed stocks. ECB Executive Board member Elizabeth McCaul will also speak today.

US Housing Sector and Chicago Fed National Activity Index in Focus

Later in the Tuesday session, US existing home sales and Chicago Fed National Activity Index (CFNAI) numbers will draw investor interest. The CFNAI will likely influence market risk sentiment more. Economists forecast the CFNAI to fall from 0.02 to -0.01 in October. Weaker-than-expected numbers would support bets on an H1 2024 Fed rate cut.

After the Eurozone closing bell, the FOMC meeting minutes will influence the Wednesday session. However, the US CPI and Retail Sales Reports came after the Fed interest rate decision, making the minutes dated. Nonetheless, the minutes could reveal other considerations for the Fed to begin discussing rate cuts.

The futures markets point to a positive start to the Tuesday session. The DAX and the Nasdaq mini were up 19 and 22 points, respectively.

Short-Term Forecast

The near-term trend for the DAX hinges on central bank speeches and economic indicators. While rising bets on ECB and Fed rate cuts are tailwinds, cracks in the US economy could reignite fears of a hard landing. The threat of a hard landing could impact the appetite for riskier assets.

DAX Technical Indicators

Daily Chart

The DAX held above the 50-day and 200-day EMAs, with the EMAs affirming bullish price signals. Significantly, the 50-day EMA converged on the 200-day EMA. A bullish cross could support a breakout to 16,000.

A DAX move through the 16,004 resistance level would bring the trend line into view.

ECB commentary and US economic indicators are the focal points.

However, a fall through 15,850 would give the bears a run at the 15,694 support level.

The 14-day RSI reading of 71.23 shows the DAX in overbought territory. Selling pressure will likely intensify at 16,000.

4-Hourly Chart

The DAX remained above the 50-day and 200-day EMAs, reaffirming bullish price signals. A bull cross of the 50-day EMA through the 200-day EMA also sent bullish price signals.

A move through the 16,004 resistance level would give the bulls a run at the trend line.

However, a fall through the 15,850 handle would bring the 15,694 support level into play.

The 78.74 14-4 hour RSI shows the DAX in overbought territory. Selling pressure could intensify at 16,000.

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