DAX Futures Signal a Choppy Open as Focus Turns to the Jobs Report

It was a bullish Wednesday session for the DAX, which rose by 0.46% to end the day at 15,632.

Despite disappointing economic indicators from the euro area,  the DAX managed to avoid another bearish session.

A mixed start to the day saw the DAX fall to an early session low of 15,525 before rising to a late session high of 15,667. However, a late pullback left the DAX with modest gains. A mixed US equity market session capped the upside and recovery of the Tuesday losses.

Economic Indicators Deliver Early DAX Support

German industrial production increased by 3.5% in January versus a forecasted 1.4%. In December, industrial production slid by 3.1%.

According to Destatis,

• Production in industry excluding energy and construction rose by 1.9% in January.
• Strong growth in electronic equipment manufacturing (+7.1%) and the manufacture of chemicals & chemical products (+9.8%) delivered the positive headline figure.
• However, motor vehicle, trailers, & semi-trailer manufacturing slid by 5.2%, with the manufacture of basic pharmaceutical products and pharmaceutical preparations tumbling by 12.9%.

Manufacturing sector PMI numbers for January and February showed the German manufacturing sector in contraction at the turn of the year. However, factory orders rose unexpectedly in January, supporting a pickup in manufacturing sector activity.

While the pickup in factory orders and industrial production signals a more favorable economic outlook for Germany, the devil was in the details. The sharp decline in manufacturing across the auto and pharma sectors was of concern.

German retail sales figures also disappointed. Retail sales decreased by 0.3% in January versus a forecasted 2.0% rise. Retail sales tumbled by 5.3% in December. The latest German retail sales will disappoint the ECB and question the more optimistic economic outlook.

Euro area GDP numbers also failed to impress. In Q4, the economy stalled, which was a downward revision to prelim figures. Year-on-year, the economy grew by 1.8%, down from a prelim 1.9%. The economy grew by 2.3% in Q3.

From the US, the stats were bullish, supporting a more hawkish Fed Chair. According to the ADP, nonfarm payrolls increased by 242k in February versus a forecasted 200k rise. Payrolls saw a more modest 119k increase in January.

JOLT job openings also beat expectations. Job openings stood at 10.824 million in January versus a forecasted 10.5 million. However, job openings were down from 11.234 in December.

The Market Movers

It was a mixed day for the auto sector. Continental surged by 7.62%, with Volkswagen and Porsche rising by 0.91% and 1.63%, respectively. However, BMW and Daimler saw losses of 0.04% and 0.29%, respectively.

Bank stocks had a bullish session. Deutsche Bank and Commerzbank ended the day with gains of 0.43% and 0.63%, respectively.

The Day Ahead for the DAX

It is a quiet day ahead on the European economic calendar. There are no material stats for investors to digest, leaving ECB chatter to draw interest ahead of the US session.

This afternoon, US jobless claims will draw interest following the hotter-than-expected JOLTs and ADP labor market numbers. Sub-200k initial jobless claims numbers should support a positive US Jobs Report on Friday and the hawkish bets of a 50-basis point Fed interest rate hike in March.

However, investors should also monitor the news wires for FOMC member chatter. Dovish comments would deliver DAX support.

Technical Indicators

The DAX has to avoid the 15,632 pivot to target the First Major Resistance Level (R1) at 15,691. A move through the Wednesday high of 15,667 would signal a bullish session. However, the DAX would need the US stats and Fed chatter to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $15,750 and resistance at 15,800. The Third Major Resistance Level (R3) sits at 15,892.

A fall through the pivot would bring the First Major Support Level (S1) at 15,549 into play. However, barring a US data-fueled sell-off, the DAX should avoid sub-$15,400. The Second Major Support Level (S2) at 15,466 should limit the downside. The Third Major Support Level (S3) sits at 15,324.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The DAX sits above the 50-day EMA (15,452). The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA (15,452) would support a breakout from R1 ($15,691) to give the bulls a run at R2 (15,750) and 15,800. However, a slide through the First Major Support Level (S1) at 15,549 would bring S2 (15,466) and the 50-day (15,452) into view. A fall through the 50-day EMA would signal a bullish trend reversal.

The DAX Futures Sees Red

Looking at the futures markets, DAX was down 22 points, with the NASDAQ mini falling by 27. The Dow mini was down 38 points, however.

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