Dax Index: DAX Stocks Mixed Response to PMI Numbers and ECB Speculations

Highlights

• DAX’s winning streak continues for a third session, closing Wednesday at 15,728 points.
• U.S. economic indicators trend bearishly, hinting at a possible Fed pause on interest rates.
• Investors eye Jackson Hole Symposium, as dovish tones could further shake market confidence.

Wednesday Session Overview

The DAX extended its winning streak to three sessions on Wednesday. Following a 0.66% rise on Tuesday, the DAX gained 0.15% to end the day at 15,728. The DAX hit an early high of 15,821 before falling to a low of 15,672. However, a late recovery reversed losses from the session.

Economic indicators from Japan raised the hope of a pickup in private sector activity. In August, the all-important services PMI increased from 53.8 to 54.3. However, PMI numbers for Germany and the Eurozone were disappointing.

Germany’s manufacturing sector PMI increased modestly from 39.8 to 39.1, while the services PMI tumbled from 52.3 to 47.3. Economists forecast PMIs of 38.7 and 51.5, respectively.

The Eurozone PMIs followed a similar trend, with the manufacturing PMI rising from 42.7 to 43.7, while the services PMI slid from 50.9 to 48.3. Since COVID and the Ukraine war, the services sector has contributed more to the Eurozone economy. The service sector contraction raises the threat of a Eurozone recession while increasing the chance of an ECB hold on interest rates.

Economic indicators from the US were also bearish. The US services PMI fell from 52.3 to 51.0, with the manufacturing PMI down from 49.0 to 47.0. While the services sector avoided sub-50.0, the slowdown in activity increased the chance of a Fed pause on interest rates.

On Wednesday, the NASDAQ and S&P 500 gained 1.59% and 1.10%, respectively. The Dow rose by 0.54%.

Wednesday’s Market Movers

It was a mixed session for the auto sector on Tuesday. BMW and Continental AG slid by 1.27% and 1.24%, respectively.

Mercedes-Benz Group and Volkswagen also saw red, falling by 0.37% and 0.59%, respectively. Porsche bucked the trend, rising by 0.02%. Manufacturing PMI numbers from Germany and the Eurozone fueled auto-demand fears.

Bank stocks also had a mixed session. Commerzbank slid by 1.96%, while Deutsche Bank gained 0.11%. Recessionary jitters and the S&P Global downgrades of US banks tested buyer appetite.

Adidas was the worst performer, sliding by 3.30%. Foot Locker (FL) missed earnings forecasts and cut its full-year projection on Wednesday, leading to the sell-off.

The Day Ahead for the DAX

There are no euro area economic indicators to provide direction to the DAX. However, NVIDIA (NVDA) earnings will support tech stocks. NVIDIA beat earnings and delivered a bullish projection after the US closing bell. Tech stocks will respond, while recessionary jitters will likely cap the upside.

US jobless claims and core durable goods orders will also need consideration this afternoon. The global equity markets are on a knife-edge at present. Investors must contend with signals of an economic slowdown and easing bets on further central bank action to curb inflation.

An unexpected jump in initial jobless claims and a fall in core durable goods orders would test buyer appetite. Economists forecast core durable goods orders to increase by 0.2%, with initial jobless claims to rise from 239k to 240k.

Away from the numbers, investors must also monitor speeches from the Jackson Hole Symposium. Dovish chatter on the fear of an economic slowdown would be bearish. However, hawkish chatter would have a more negative impact on sentiment. A hawkish Fed and cracks in the US economy could leave investors worrying about a hard landing.

DAX Technical Indicators

The DAX remained above the 15,600 – 15,525 support band this morning. However, despite three bullish sessions, the DAX hovered below the 50-day and 200-day EMAs, sending bearish near and longer-term price signals.

Looking at the 14-4H RSI, the RSI sits at 48.19, reflecting bearish sentiment, with selling pressure overweighing buying pressure. Significantly, the RSI aligns with the EMAs, signaling a fall through the upper level of the 15,600 – 15,525 support band.

Price action hinges on updates from the Jackson Hole Symposium and US economic indicators.

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