DAX, CAC, and FTSE 100: DAX Set to Track the Asian Markets Higher

The Majors

It was a bullish Thursday session, with the CAC and DAX recovering from their disappointing start to the month. The CAC rose by 0.69% to lead the way, with the DAX and FTSE 100 seeing gains of 0.15% and 0.37%, respectively.

A pullback in the GBP/USD delivered FTSE 100 support, with economic data from the US and Fed chatter supporting demand for riskier assets.

Hotter-than-expected core inflation numbers for the euro area failed to spook investors. Headline inflation raised investor hope that the ECB would take a less aggressive post-March policy position. However, the ECB monetary policy meeting minutes capped the upside for the CAC and DAX, with the minutes revealing the commitment to tame inflation.

Later in the session, US economic indicators were upbeat, while Fed chatter raised hopes of a slow and steady Fed interest rate hike policy.

The NASDAQ Composite Index and the S&P 500 responded to the stats and FOMC Member Bostic comments, rising by 0.73% and 0.76%, respectively. The Dow gained 1.05%.

The Stats

The euro area annual inflation rate softened from 8.6% to 8.5%, while the core inflation rate accelerated from 5.3% to 5.6%. Economists forecast inflation rates of 8.2% and 5.3%, respectively.

According to Eurostat,

• Food, alcohol, & tobacco is forecast to have the highest annual rate of 15.0% versus 14.1% in January.
• Non-energy industrial goods price inflation increased from 6.7% to 6.8%, with services rising from 4.4% to 4.8%.
• However, energy price inflation softened from 18.9% to 13.7%.

Softer energy price inflation is significant for the ECB. In the latest ECB Economic Bulletin, the ECB noted that rising wage growth and declining energy price inflation should ease the loss of purchasing power and support consumption. Consumer confidence would need to improve to support the ECB’s outlook on consumption.

Eurozone unemployment numbers failed to influence the EUR/USD, holding steady at 6.7%.

From the US

The US economic calendar drew plenty of interest on Thursday, with the US labor market in the spotlight. Unit labor costs jumped by 3.2% in Q4, up from 2.0% in Q3, with initial jobless claims falling from 192k to 190k. The latest labor market numbers supported the more hawkish Fed interest rate trajectory to bring inflation to target.

However, FOMC Member Bostic removed immediate fear of an aggressive Fed response, favoring a slow and steady policy approach and a 25-basis point interest rate hike later this month.

The Market Movers

For the DAX: It was a mixed day for the auto sector. Daimler rose by 0.40%, with Volkswagen and BMW seeing modest gains of 0.12% and 0.01%, respectively. Continental fell by 0.32% to buck the trend.

It was also a mixed day for the banks. Deutsche Bank slid by 1.26%, while Commerzbank ended the day up by 0.27%.

From the CAC, it was another bearish day for the banks. Soc Gen fell by 0.77%, with BNP Paribas and Credit Agricole seeing losses of 0.05% and 0.28%, respectively. News of Belgium planning to sell its stake in BNP continued to weigh on bank stocks.

However, it was a bullish session for the French auto sector, with Stellantis NV and Renault rising by 0.68% and 1.12%, respectively.

Air France-KLM slid by 1.73%, while Airbus SE rose by 0.47%

From the FTSE 100, HSBC Holdings PLC tumbled by 3.33%, while Shell Plc and BP Plc saw gains of 1.58% and 1.98%, respectively. Unilever Plc rose by 1.23%, with Diageo gaining 1.65%.

Across the banking sector, Barclays (-1.53%), Lloyds (-1.19%), and Standard Chartered (-0.25%) also struggled.

The Day Ahead for the DAX and the Pack

It’s a busy day ahead on the European economic calendar. Finalized services and Composite PMIs for February will draw interest. Upward revisions to the services PMI should support the appetite for riskier assets, though we expect the sub-component, including inflation and new orders to influence.

Trade data from Germany will also need consideration ahead of the PMIs.

However, the US ISM Non-Manufacturing PMI, ISM Non-Manufacturing Prices Index, and Fed chatter will likely have the final say. A further pickup in service sector activity and a spike in non-manufacturing prices may remove the hope of a slow and steady Fed. FOMC Members Logan, Bowman, and Bostic will deliver speeches today.

The Futures – DAX Leads the Way

Across the futures markets, the FTSE 100 was up 24 points, with the CAC and DAX gaining 49.5 points and 57 points, respectively. The US futures had a bearish morning. The NASDAQ mini was down 24.25 points, with the Dow mini falling by 18.

For a look at all of today’s economic events, check out our economic calendar.