DAX in the Hands of Euro Area and US stats and Central Bank Chatter

It was a bullish end to a bearish week for the DAX. On Friday, the DAX gained 0.50% to end the week down 0.30% to 15,914.

Economic indicators from the euro area had a limited impact on the DAX, with investors responding to the lack of progress toward raising the US debt ceiling.

Disappointing US economic indicators failed to spook investors, with an afternoon session recovery delivering the gains.

Corporate earnings delivered much-needed support. Allianz failed to beat estimates but posted a profit surge that supported bank stocks. CAX-listed Societe Generale also contributed to banking sector gains, beating first-quarter earnings estimates.

On Friday, the NASDAQ Composite Index fell by 0.35%, with the S&P 500 and the Dow seeing losses of 0.16% and 0.03%, respectively.

Euro Area and US Economic Indicators and the Debt Crisis Cap Gains

There were no German economic indicators to draw interest on Friday. However, finalized French and Spanish inflation figures were in focus.

In April, the French annual inflation rate accelerated from 5.7% to 5.9%, unchanged from prelim numbers. Spain also recorded higher consumer price inflation, with the annual inflation rate up from 3.3% to 4.1%. Last week, the ECB responded to the prelim inflation numbers, raising interest rates by 25 basis points and warning of further hikes.

US consumer sentiment and expectations numbers for May drew interest as the markets monitored debt ceiling updates from Capitol Hill.

The Michigan Consumer Sentiment Index fell from 63.5 to 57.7, with the Expectations Index down from 60.5 to 53.4. Economists forecast more modest declines to 63.0 and 59.8, respectively.

Consumer concerns about the economic outlook and the debt crisis weighed. However, inflation expectations were mixed, with consumers expecting year-ahead inflation to soften from 4.6% to 4.5% while projecting long-run inflation expectations to rise from 3.0% to 3.2%.

The Market Movers

It was a mixed day for the auto sector. Continental led the way, gaining 1.93%, with Mercedes-Benz Group and Porsche up by 0.13% and 0.19%, respectively. However, Volkswagen and BMW saw losses of 0.33% and 0.49%, respectively.

It was a bullish session for the banks. Commerzbank and Deutsche Bank ended the day with gains of 1.36% and 0.29%, respectively.

The Day Ahead for the DAX

It is a relatively busy day ahead on the European economic calendar. German wholesale inflation figures for April will set the tone ahead of the European opening bell. Wholesale price inflation is a precursor to consumer price inflation. An unexpected pickup in wholesale price inflation would pressure the ECB to continue to deliver further rate hikes.

However, wholesale price deflation would sound the alarm bells. Economists forecast wholesale inflation to soften from 2.0% to 0.9% in April.

Later in the session, Eurozone industrial production figures will also influence. German industrial production tumbled by 3.4% in March, suggesting a weak number.

Investors should also track ECB commentary, with inflation, the US debt ceiling, and the banking sector in the spotlight. ECB Executive Board member Andrea Enria is on the calendar to speak today, with ECB President Lagarde attending the Eurogroup meeting in Brussels.

On Monday, Economic Bulletin pre-releases will also draw interest. The ECB will release a model-based assessment of the macroeconomic impact of the ECB’s monetary policy tightening since December 2021.

Looking ahead to the US session, it is a relatively busy day on the US economic calendar. NY Empire State Manufacturing Index numbers for May will be in focus. Economists forecast a fall from 10.8 to -2.5, which would be bearish.

FOMC member commentary will also draw interest, with members Kashkari, Bostic, and Barkin speaking today.

Beyond the economic calendar, the banking sector and the US debt ceiling will also need monitoring.

DAX Technical Indicators

Resistance & Support Levels

The DAX has to avoid the 15,901 pivot to target the First Major Resistance Level (R1) at 15,951. A move through the Friday high of 15,938 would send a bullish signal. However, the DAX would need economic indicators, central bank chatter, and US debt ceiling talks to support a breakout.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at 15,987 and resistance at 16,000. The Third Major Resistance Level (R3) sits at 16,073.

A fall through the pivot would bring the First Major Support Level (S1) at 15,865 into play. However, barring a risk-off-fueled sell-off, the DAX should avoid sub-15,800. The Second Major Support Level (S2) at 15,815 should limit the downside. The Third Major Support Level (S3) sits at 15,729.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The DAX sits above the 50-day EMA (15,828). The 50-day EMA pulled further away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 (15,865) and the 50-day EMA (15,828) would support a breakout from R1 (15,951) to give the bulls a run at R2 (15,987) and 16,000. However, a fall through S1 (15,865) would bring the 50-day EMA (15,828) and S2 (15,815) into view. A fall through the 50-day EMA would send a bearish signal.

The DAX Futures Sees Red

Looking at the futures markets, DAX was down 10 points, with the NASDAQ mini falling by 13.50. The Dow slipped by 23.

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