DAX Index: Euro Area Stats, Earnings, and Fed Chair Powell: The Midweek Challenges

Highlights

• The DAX gained by 0.11% on Tuesday, ending the session at 15,153.
• On Wednesday, German corporate earnings, ECB speeches, and euro area economic indicators will draw interest.
• However, Fed Chair Powell will be the focal point of the Wednesday session.

Tuesday DAX Overview

The DAX gained 0.11% on Tuesday. After a 0.35% loss on Monday, the DAX ended the day at 15,153.

German Industrial Production and Euro Area Stats Impact

On Tuesday, German industrial production figures for September aligned with recent manufacturing PMI surveys. Industrial production tumbled by 1.4%, following a 0.1% decline in August. Economists forecast a modest 0.1% fall. The sharp fall in production reflected the lackluster demand environment. Macroeconomic conditions continue to affect demand.

Eurozone producer prices sent a similar message, with a continued year-over-year downward trend. However, the trends varied across the sectors, with prices increasing for capital goods and durable and non-durable consumer goods.

While economic indicators sent mixed signals, corporate earnings impacted investor sentiment. Daimler Truck Holding released disappointing Q3 earnings, sending the auto sector into negative territory. Supply chain issues affected vehicle sales.

However, Deutsche Boerse delivered impressive forecasts to counter auto sector woes.

The DAX moved within a relatively tight range on Tuesday. Investors were cautious ahead of central bank speeches that could redefine what to expect from the ECB and the Fed.

The Tuesday Market Movers

Deutsche Boerse rallied 3.52% on the earnings forecasts.

However, auto stocks led the way down. Daimler Truck Holding slid by 4.62%, with BMW declining by 1.64%. Porsche and Mercedes Benz Group ended the day down 1.23% and 1.15%. Volkswagen and Continental fell by 0.82% and 0.96%, respectively.

German Inflation and Eurozone Retail Sales in Focus

On Wednesday, the German economy will be in the spotlight for the third consecutive session. Finalized inflation figures for October will need consideration. Softer inflation numbers could ease pressure on the ECB to keep rates higher for longer. According to preliminary numbers, the German inflation rate softened from 4.5% to 3.8% in October.

Later in the session, Eurozone retail sales will warrant consideration. A larger-than-expected fall in retail sales could impact consumer sector-listed stocks. Economists forecast euro area retail sales to decline by 0.2% in September. In August, retail sales tumbled 1.2%.

ECB and Corporate Earnings May Have More Influence on the DAX

With inflation and consumption in focus, investors should monitor ECB commentary throughout the session. ECB Chief Economist Philip Lane and Executive Board member Andrea Enria are on the calendar to speak. Philip Lane would have more impact on risk appetite. ECB President Lagarde will attend the Eurogroup meetings in Brussels.

References to the economic outlook, inflation, and monetary policy will influence the DAX.

Away from the economic calendar, corporate earnings will continue to provide direction to the DAX. Siemens Healthineers, Deutsche Post, Continental, Commerzbank, and Adidas are among the big names releasing earnings on Wednesday.

Fed Chair Powell and FOMC Members in the Spotlight

On Wednesday, Fed Chair Jerome Powell will draw investor attention. Amidst rising euro area recessionary fears, a hawkish Fed could force the DAX into retreat. Softer US labor market stats fueled bets on the Fed ending its rate hike cycle and a June 2024 rate cut. However, uncertainty lingers. Overnight on Tuesday, Fed speakers left rate hikes on the table, stirring investor jitters.

While Fed Chair Powell will be the focal point, Fed Vice Chair John Williams and FOMC voting members Philip Jefferson and Michael Barr will also deliver speeches. Contradictions to forward guidance could fuel uncertainty and pressure the demand for riskier assets.

The futures markets point to a negative start to the Wednesday session. The DAX and the Nasdaq mini were down 42 and 21 points, respectively.

Short-Term Forecast

Near-term trends remain dependent on central bank speeches. Investors are resigned to the prospect of a euro area recession. However, hawkish Fed and ECB forward guidance would adversely impact the DAX.

DAX Technical Indicators

Daily Chart

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

A DAX move through the 15,247 resistance level and the 50-day EMA would give the bulls a run at the 200-day EMA.

Euro area economic indicators, corporate earnings, and central bank speeches will be focal points on Wednesday.

However, a drop below 15,000 would bring the 14,957 support level into play.

The 14-day RSI reading of 52.03 indicates a DAX move through the 15,247 resistance level and the 50-day EMA before entering overbought territory.

4-Hourly Chart

The DAX remains above the 50-day EMA while sitting below the 200-day EMA, reaffirming bullish near-term but bearish longer-term price signals. A DAX move through the 15,247 resistance level would bring the 200-day EMA into play.

However, a break below the 50-day EMA and the 14,957 support level would give the bears a run at 14,800.

The 60.35 14-4 hour RSI reading indicates a DAX move through the 15,247 resistance level before entering overbought territory.

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