DAX in the Hands of Consumer Sentiment Numbers and the ECB
It was a relatively bullish Tuesday for the DAX, which rose by 0.09% to end the day at 15,142.
Easing banking sector jitters and economic indicators from the euro area delivered early support. However, weak manufacturing sector conditions and a hawkish ECB continued to peg the DAX back from a sustainable breakout.
While fears of another bank collapse may have abated, concerns over a credit crunch lingered.
Industrial profit numbers from China were a stark reminder of the current environment, with global demand on a weaker footing. The markets must gauge the lasting impact of synchronized interest rate hikes by the Fed, the ECB, and the BoE.
Business Sentiment Sends Mixed Signals
French and Italian business sentiment figures showed little movement at the end of Q1. French business confidence fell from 105 to 104, while business confidence in Italy increased from 103.0 to 104.2.
Rising borrowing costs and sticky inflation likely weighed on business sentiment, with the banking sector crisis and fears of a credit crunch focal points.
From the US, trade and consumer confidence drew interest.
The US goods trade deficit widened from $91.09 billion to $91.63 billion in February. More significantly, consumer confidence numbers beat expectations. The CB Consumer Confidence Index rose from 103.4 to 104.2 versus a forecast of 101.0.
According to the March survey,
- The Expectations Index increased from 73.0 to 70.4 but remained below 80.0. At sub-80 for 12 out of the last 13 months, the Index signaled a possible recession.
- Significantly, the survey cutoff date was after the collapse of Silicon Valley Bank and Signature Bank.
- Consumers noted deteriorating labor market conditions. The share of consumers saying jobs are ‘plentiful’ declined, while those stating jobs are not as plentiful increased in March.
- Consumer spending plans were also disappointing. The survey showed that consumers plan to spend less on highly discretionary categories, including playing the lottery, visiting amusement parks, and dining.
- However, consumers plan to spend more on less discretionary categories, including healthcare and home or auto maintenance and repair.
The Market Movers
It was a mixed Tuesday for the auto sector. Continental led the way, rising by 1.70%, with Volkswagen (0.84%) and Daimler seeing gains of 0.84% and 0.57%, respectively. BMW saw a more modest 0.14% rise, while Porsche bucked the trend, falling by 1.08%.
It was also a mixed session for the banks. Commerzbank gained 1.70%, while Deutsche Bank slid by 1.58%.
The Day Ahead for the DAX
It is another relatively quiet day ahead on the economic calendar. The German GfK Consumer Climate Indicator for April will provide early direction.
Following the latest Ifo Business Climate Index numbers, a pickup in consumer sentiment would support the more optimistic outlook for the German economy. Economists forecast the Indicator to rise from -30.5 to -29.2.
US stats are also on the lighter side. Pending home sales figures for February should have a muted impact on the DAX.
A second day of Barr testimony on Capitol Hill will draw interest. Talk of a credit crunch would weigh on the DAX.
DAX Technical Indicators
The DAX has to move through the 15,169 pivot to target the First Major Resistance Level (R1) at 15,235 and the Tuesday high of 15,262. A return to 15,200 would signal a bullish session. However, the DAX would need the ECB and economic indicators to support a bullish session.
In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $15,327. The Third Major Resistance Level (R3) sits at 15,485.
Failure to move through the pivot would leave the First Major Support Level (S1) at 15,077 in play. However, barring a flight to safety, the DAX should avoid sub-$15,000. The Second Major Support Level (S2) at 15,011 should limit the downside. The Third Major Support Level (S3) sits at 14,853.
Looking at the EMAs and the 4-hourly chart, the EMAs send bearish signals. The DAX sits below the 50-day EMA (15,159). The 50-day EMA closed in on the 200-day EMA, with the 100-day EMA narrowed to the 200-day EMA, delivering bearish signals.
A move through the 50-day (15,159) and 100-day (15,184) EMAs would support a breakout from R1 (15,225) to give the bulls a run at R2 (15,327). However, failure to move through the 50-day EMA (15,159) would leave the Major Support Levels in play. A move through the 50-day EMA would send a bullish signal.
The DAX Futures Sees Green
Looking at the futures markets, DAX was up 56 points, with the NASDAQ mini up 56.5. The Dow mini rose by 132 points.
For a look at the economic events, check out our economic calendar.