DAX Bears Eye a Seven-Day Losing Streak on Recession Woes

Highlights

• It was a bearish start to the week for the DAX, with increasing economic uncertainty and Siemens Energy AG weighing.
• German Ifo Business Climate Index numbers added to the bearish mood, as sentiment soured.
• It is a quiet day ahead, with no economic indicators to shift sentiment, leaving US stats and central bank chatter in focus.

It was a bearish start to the week for the DAX, which fell by 0.11%. Following a 0.99% loss on Friday, the DAX ended the day at 15,813. Significantly, the DAX extended its losing streak to six sessions.

The bearish sentiment from the Asian equity markets spilled into the European session. Recessionary jitters amidst hawkish central bank chatter continued to grip the global financial markets.

The Fed, the ECB, and the BoE show little sign of hitting the brakes, with inflation trumping economic growth.

However, the markets brushed aside the weekend news of a mutiny in Russia that could have impacted oil and gas supplies.

German economic indicators contributed to the pullback, while ECB commentary delivered no surprises to move the dial. Later in the day, there were no US economic indicators to shift the mood.

The DAX joined the NASDAQ Composite Index, S&P 500, and the Dow in the red. On Monday, the NASDAQ fell by 1.16%, with the Dow and the S&P 500 seeing losses of 0.45% and 0.04%, respectively.

German Business Sentiment Slides

It was a relatively busy start to the week on the European economic calendar. The German Ifo Business Climate Index drew interest early in the session.

In June, the German Ifo Business Climate Index fell from 91.5 to 88.5 versus a forecasted 90.7. Significantly, the Expectations Index tumbled from 88.3 to 83.6, with the Current Assessment Index declining from 94.8 to 93.7. Economists forecast more modest declines to 88.0 and 93.5, respectively.

The Market Movers

It was a mixed Monday session for the auto sector. Continental AG and BMW saw gains of 0.75% and 0.57%, respectively.

Porsche and Volkswagen also found support, rising by 0.26% and 0.31%, respectively. However, Mercedes-Benz Group bucked the trend, falling by 0.07%.

It was also a mixed session for the banks. Commerzbank fell by 0.29%, while Deutsche Bank gained 0.14%.

However, Siemens Energy AG was among the worst performers, falling by 2.08%, with Rheinmetall AG sliding by 4.18% to the bottom of the DAX. Siemens Energy rating downgrades and target price cuts continued to hit as investors reacted further to news of quality problems at its wind turbine division. The group scrapped its 2023 profit outlook on Thursday.

The Day Ahead for the DAX

It is a quiet Tuesday session. There are no euro area economic indicators for investors to consider today. The lack of economic indicators will likely leave the markets on the defensive ahead of the US session.

US core durable goods and CB Consumer Confidence numbers will move the dial. A fall in the CB Consumer Confidence Index to below 100 would likely overshadow upbeat core durable goods orders.

However, investors should continue to monitor central bank chatter. ECB President Christine Lagarde and ECB Executive Board Members Isabel Schnabel, Frank Elderson, and Fabio Panetta are on the calendar to speak today. Dovish July sentiment or hawkish September policy intentions would need consideration.

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 (15,985). 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 R1 (15,887) would give the bulls a run at R2 (15,962) and the 100-day (15.985) and 50-day (16,028) EMAs. However, a fall through the 200-day EMA (15,808) would bring S1 (15,726) into view. A move through the 50-day EMA would send a bullish signal.

Resistance & Support Levels