DAX Index: China’s Impact, Middle East Concerns, and Corporate Earnings in Focus

Highlights

• The DAX Index gained 0.09% on Tuesday, closing at 15,252, building on Monday’s positive session.
• Eurozone inflation and central bank commentary in focus early in the European session.
• China’s economic activity pickup noted, while Middle East tensions and Fed rate goals remain focal points.

DAX Tuesday Overview

On Tuesday, the DAX rose by 0.09%. Following a 0.34% gain on Monday, the DAX ended the day at 15,252.

US Retail Sales and Earnings Delivered a Choppy End to Tuesday

German and Eurozone ZEW Economic Sentiment figures surprised the markets on Tuesday. Sentiment toward the German and Eurozone economies improved markedly in October. The German ZEW Economic Sentiment Index increased from -11.4 to -1.1.

The latest figures suggest a possible shift in economic fortunes for Germany and the euro area. However, corporate earnings overshadowed hopes of containing the Middle East conflict and the sentiment numbers.

Later in the day, hotter-than-expected US retail sales figures dragged the DAX deeper into negative territory before a late recovery. The September figures raised the chances of a Fed rate hike, weighing on riskier assets. Solid US earnings supported the late rebound, with Goldman Sachs (GS) and Bank of America (BAC) beating forecasts.

US equities had a mixed Tuesday session. The Dow gained 0.04%, while the S&P 500 and NASDAQ Composite Index fell by 0.01% and 0.25%.

The Tuesday Market Movers

Bank stocks ended the Tuesday session in negative territory. Commerzbank and Deutsche Bank saw losses of 0.71% and 0.59%, respectively. Investors likely took profits after the Monday breakout.

Sartorius AG continued to face the wrath of investors, falling 2.37%. On Friday, Sartorius AG tumbled by 13.28% as investors responded to the downward revision to its full-year forecast.

However, Airbus Group rallied 3.55% as investors responded to new Buy ratings. On Tuesday, Jefferies upgraded the stock from Hold to Buy.

The Wednesday Session: China and the Middle East in Focus

Economic indicators from China showed a pickup in economic activity in the third quarter. The better-than-expected economic indicators suggested stimulus measures from Beijing are being effective.

However, market jitters about the Middle East conflict and sentiment toward Fed interest rate goals will test the buyer appetite for DAX-listed stocks. Updates from the Middle East will influence market risk appetite. US President Biden is in the region.

Finalized Eurozone inflation figures need consideration. An upward revision to prelim inflation figures may pressure the DAX on more hawkish ECB policy bets.

With inflation in the spotlight, ECB President Christine Lagarde is on the ECB calendar to speak. A hawkish reaction to the inflation figures could spook investors.

Away from the economic calendar, corporate earnings will move the dial.

The US Housing Sector and the Fed in Focus

Later today, housing sector data is unlikely to influence the DAX. However, Fed commentary will draw investor interest. Hawkish commentary following the US retail sales report would impact the buyer appetite for riskier assets.

Corporate earnings also need consideration. Morgan Stanley (MS), Tesla (TSLA), and Netflix (NFLX) are among the big names to release earnings results on Wednesday.

The futures markets point to a mixed Wednesday session. The DAX was up 17 points, while the NASDAQ mini was down 21 points.

Short-Term Forecast

Near-term trends hinge on news updates on the Middle East conflict, central bank commentary, and corporate earnings. An escalation in the Middle East conflict may overshadow upbeat earnings and impact the appetite for riskier assets.

DAX Technical Indicators

Daily Chart

The DAX sat below the 50-day and 200-day EMAs, affirming bearish price signals.

A break below the 15,245 support level would bring the 15,058 support level into play. An escalation in the Middle East conflict and hawkish Fed commentary would impact risk sentiment.

However, dovish central bank commentary and a de-escalation in the Middle East would support a move to the 200-day EMA and 15,459 resistance level. Selling pressure will likely intensify at 200-day EMA. The 200-day EMA is confluent with the 15,459 resistance level.

The 14-day RSI reading of 44.00 supports a DAX fall through the 15,245 support level and a move to the 15.058 support level before entering oversold territory.

4-Hourly Chart

The DAX hovers below the 50-day and 200-day EMAs, reaffirming bearish price signals. A DAX break above the 50-day EMA would support a move toward the 15,459 resistance level.

However, a fall through the 15,245 support level would bring the 15,058 support level into play.

The 47.68 14-4 hour RSI reading suggests a DAX break below the 15,245 support level and a move toward the 15,058 support level before entering oversold territory.

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