DAX Index: Corporate Earnings and US Inflation to Dictate DAX Trends on Friday

Highlights

• The DAX slid by 1.08% on Thursday, ending the session at 14,731.
• Corporate earnings left the Dax in negative territory.
• On Friday, US inflation and corporate earnings will be focal points.

DAX Thursday Overview

The DAX slid by 1.08% on Thursday. Reversing a 0.08% gain from Wednesday, the DAX ended the day at 14,731.

Corporate Earnings Overshadow ECB Hold

On Thursday, German corporate earnings dragged the DAX into negative territory. Mercedes Benz Group released earnings that fell short of forecasts. The luxury car manufacturing highlighted price competition in the EV space as a contributory factor. Things were no better for Volkswagen, which reported a 7% fall in year-to-date profits through September 2023.

The earnings-induced losses were despite the ECB ending a ten-rate hike cycle by hitting the pause button. During the ECB press conference, ECB President Lagarde discussed a weak near-term outlook for growth but a strengthening economy in the medium term.

US corporate earnings also weighed on market risk sentiment. The tech sector remained under pressure after Alphabet’s (GOOGL) earnings. While Meta Platforms (META) beat earnings forecasts, a weaker outlook dragged tech stocks south.

However, US GDP numbers cushioned the blow. While the US economy had a stellar third quarter, softer inflation expectations and a downward trend in disposable income countered bets on a Fed rate hike. Treasury yields tumbled in response to bets on the Fed leaving rates unchanged. However, expectations of a higher-for-longer Fed rate path remained intact.

On Thursday, the Nasdaq Composite Index declined by 1.76%, with the S&P 500 and Dow falling by 1.18% and 0.76%.

The Thursday Market Movers

Mercedes Benz Group slid by 5.77%, sending the auto sector into negative territory. BMW and Porsche ended the session with losses of 3.01% and 1.13%, with Volkswagen down 0.82%. Continental and Daimler Truck Holding fell by 0.80% and 0.27%.

However, Siemens caused a stir, with news hitting the wires of Siemens Energy seeking state guarantees. Siemens Energy AG slumped 35.49%, with Siemens AG and Siemens Healthineers seeing losses of 4.54% and 3.60%.

Corporate Earnings Remain in the Spotlight

On Friday, industrial profit numbers from China will influence market risk sentiment. A less marked fall in industrial profits would support the improving sentiment toward the Chinese economy. Industrial profits declined by 9.0% (YTD) year-over-year in September (Aug: -11.7%). Economists forecast profits to fall by 9.0%.

Corporate earnings also need consideration. After the US closing bell, Amazon.com (AMZN) and Intel Corp. (INTC) beat profit forecasts.

The German Earnings Calendar will draw investor interest. MTU Aero will release results on Friday.

There are no economic indicators from Germany to influence market risk appetite. The lack of economic indicators will leave the US economic and earnings calendar in focus later in the session.

US Inflation in the Spotlight

On Friday, US personal spending, inflation, and personal income will draw investor interest. Hotter-than-expected US inflation and rising spending and income could fuel December Fed rate hike bets.

The US GDP report highlighted softer inflation and a downward trend in disposable income. Numbers that counter the GDP report would influence Fed rate hike expectations.

US corporate earnings also warrant consideration. Exxon Mobil Corp (XOM) and Chevron Corp. (CVX) are among the big names to release results on Friday.

The futures markets point to a positive start to the Friday session. The DAX and the Nasdaq mini were up 3 and 98 points, respectively. On Friday morning, 10-year US Treasury yields were up 0.27% to 4.860%.

Short-Term Forecast

US economic indicators will influence market sentiment toward monetary policy and the DAX on Friday. Higher-than-anticipated US inflation figures may have a greater impact than positive earnings, potentially leading to further losses for the DAX.

DAX Technical Indicators

Daily Chart

The DAX remained below the 50-day and 200-day EMAs, sending bearish price signals. Significantly, the 50-day EMA crossed through the 200-day EMA, signaling a near-term bullish-trend reversal.

A DAX break above the 14,957 resistance level would support a move to 15,000. Corporate earnings and US economic indicators will be focal points.

However, a fall through the 14,575 support level would bring the 14,200 support level into view. Hotter-than-expected US inflation numbers and weaker-than-forecasted earnings would impact risk sentiment.

The 14-day RSI reading of 32.01 shows DAX on the border of oversold territory.

4-Hourly Chart

The DAX remains below the 50-day and 200-day EMAs, reaffirming bearish price signals. A DAX break above the 14,957 resistance level would bring the 50-day EMA into play.

However, a fall through the 14,575 support level would give the bears a run at the 14,200 support level.

The 36.15 14-4 hour RSI reading indicates a DAX fall to 14,500 before entering oversold territory.

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