DAX Index: China Industrial Profit Number Set a Positive Tone

Highlights

• The DAX gained 0.11% on Friday, ending the session at 16,706.
• On Wednesday, industrial profit numbers from China will set the tone.
• US economic indicators will also be focal points late in the European session.

Overview of the DAX Performance on Friday

The DAX gained 0.11% on Friday. Partially reversing a 0.27% loss from Thursday, the DAX ended the Friday session at 16,706.

US Economic Indicators Provide Late Support

On Friday, US economic indicators drove demand for riskier assets. Softer-than-expected inflation numbers supported bets on a Q1 2024 Fed rate cut. The Core PCE Price Index rose by 3.2% year-over-year in November vs. 3.4% in October.

Notably, personal income increased by 0.4%, with personal spending up 0.2% in November. Upward revisions to consumer sentiment figures were also market-friendly, raising bets on a soft landing.

However, Nike (NKE) spooked investors on Friday. Nike cut its annual sales forecasts due to lackluster consumer spending. Sport and apparel stocks tracked Nike into negative territory for the session.

On Friday, the Nasdaq Composite Index and the S&P 500 gained 0.19% and 0.17%, respectively. The Dow slipped by 0.05%.

The Friday Market Movers

European on-line retailer Zalando tumbled by 7.38%, with Adidas ending the session down 5.29% in response to the Nike outlook.

However, auto stocks were in recovery mode. BMW was the top performer, gaining 1.09%. Mercedes-Benz Group and Porsche gained 0.22% and 0.17%, respectively. Volkswagen ended the day up 0.09%.

China Industrial Profits to Set the Tone

On Wednesday, industrial profit numbers from China will set the tone for the European session. Weaker industrial profits would affect the appetite for riskier assets. Industrial profits increased by 2.7% in October vs. 11.9% in September. In August, industrial profits were up 17.2% year-over-year.

However, industrial profits were up 29.5% year-over-year in November.

US Services and Manufacturing in the Spotlight

Late in the European session, Richmond and Dallas services and manufacturing index numbers for December would garner investor interest. Upward trends in private sector activity would support bets on a soft landing and the appetite for riskier assets.

Beyond the numbers, investors must also consider Fed chatter. Hawkish commentary could impact the appetite for riskier assets.

On Wednesday, the futures market sent mixed signals. The DAX was up 53 points, while the Nasdaq mini was down 3 points.

Short-Term Forecast

Near-term DAX trends will hinge on inflation trends and ECB commentary. A pickup in euro area inflationary pressures could reduce bets on a Q1 2024 ECB rate cut. However, rising bets on a Q1 2024 Fed rate cut could limit the impact of a more hawkish ECB.

DAX Technical Indicators

Daily Chart

The DAX held above the 50-day and 200-day EMAs, with the EMAs sending bullish price signals.

A DAX break above the 16,750 handle would support a move toward the December 14 ATH 17,003.

Economic indicators from China, the ECB, and the Fed will impact market risk sentiment on Wednesday.

However, a drop below the Thursday low of 16,624 would give the bulls a run at the 16,470 support level.

The 14-day RSI reading of 70.75 shows the DAX in overbought territory. Selling pressure may intensify at the 16,750 handle.

4-Hourly Chart

The DAX remained above the 50-day and 200-day EMAs, affirming bullish price signals.

A DAX move through the 16,750 handle would bring the December 14 ATH 17,003 into view.

However, a break below the 16,600 handle would give the bears a run at the 50-day EMA and 16,470 support level.

The 52.28 14-4 hour RSI indicates a DAX return the 16,850 handle before entering overbought territory.

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