DAX Index: Eurozone Consumer Confidence and US Data in Focus

Highlights

• The DAX gained 0.77% on Monday, ending the session at 16,683.
• Gains across the US equity markets fueled buyer demand for DAX-listed stocks.
• On Tuesday, Eurozone consumer confidence warrants investor attention

Overview of the DAX Performance on Monday

The DAX gained 0.77% on Monday. Reversing a 0.07% loss from Friday, the DAX ended the week down 0.89% to 16,683.

Consumer Confidence, Private Sector PMIs, and the ECB

On Monday, investors looked ahead to key economic indicators and the ECB monetary policy decision. A higher-for-longer ECB rate path remains a headwind for the DAX. However, economists forecast a pickup in consumer confidence and a slower rate of contraction across the private sector.

Softer inflationary pressures across the Euro area could allow the ECB to begin discussions about rate cuts. An increasing threat of a Eurozone recession could also incentivize the ECB to consider rate cuts.

There were no economic indicators from Germany to impact the buyer appetite for DAX-listed stocks.

US CB Leading Index Fuels Demand for Riskier Assets

On Monday, the US CB Leading Index drew investor interest. The CB Leading Index fell by 0.1% in December after declining by 0.5% in November. Economists forecast a 0.3% decline. An elevated interest rate environment, waning consumer confidence, and a weaker manufacturing sector contributed to the decline.

However, the US equity markets responded to the better-than-expected data. On Monday, the Dow ended the day up 0.36%. The Nasdaq Composite Index and S&P 500 saw gains of 0.32% and 0.22%, respectively.

The Monday Market Movers

Retail-linked and tech stocks were among the front-runners. Online retailer Zalando SE rallied 3.88%, with Adidas gaining 1.19%.

Siemens AG and Infineon Technologies ended the day up 1.53% and 1.36%, respectively.

Auto stocks also contributed to the gains after seeing heavy losses on Friday. BMW and Volkswagen rose by 1.09% and 0.99%, respectively. Porsche and Mercedes-Benz Group saw gains of 0.71% and 0.30%, respectively.

However, Commerzbank slid by 3.39% as investors reacted to Bank of America downgrading the stock to underperform. Deutsche Bank ended the session up 1.08%, joining neighboring French banks in positive territory.

Eurozone Consumer Confidence in Focus

On Tuesday, Eurozone consumer confidence will garner investor interest. A pickup in consumer confidence could support the buyer demand for DAX-listed stocks. Economists forecast the Eurozone Consumer Confidence Index to rise from -15.0 to -14.3 in January.

Beyond the numbers, investors must track ECB commentary. Speculation about more stimulus measures from Beijing to bolster the Chinese economy also needs consideration.

Richmond Fed Indexes Put the US Economy in Focus

On Tuesday, Richmond Fed Manufacturing and Services Index numbers need consideration. A marked slowdown in private sector activity could refuel bets on a March Fed rate cut. Economists forecast the Richmond Fed Manufacturing Index to fall from -11 to -7 in January. Significantly, economists expect the Richmond Fed Services Index to fall from 0 to -5.

The markets will likely show increased sensitivity to the numbers, with the US private sector PMIs out on Wednesday.

However, no Fed speakers will influence the DAX and US equity markets. The Fed entered the Blackout period on January 21.

In the futures, the DAX and Nasdaq mini were up 4 and 20 points, respectively.

Short-Term Forecast

Near-term DAX trends hinge on German private sector PMIs, the ECB press conference, and the outlook for the economy and inflation. An unexpected fall in the PMIs and weaker growth and inflation forecasts could raise bets on an H1 2024 ECB rate cut.

DAX Technical Indicators

Daily Chart

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

A DAX break above the Monday high of 16,706 would give the bulls a run at the January 15 high of 16,736 and the 16,800 handle.

Eurozone consumer confidence and private sector data from the US need consideration.

However, a fall through the 16,600 handle would bring the 16,470 support level into play.

The 14-day RSI reading of 56.04 indicates a DAX return to 16,800 before entering overbought territory.

4-Hourly Chart

The DAX sat above the 50-day and 200-day EMAs, reaffirming bullish price signals.

A DAX return to the 16,700 handle would support a DAX move to the January 15 high of 16,736.

However, a break below the 50-day EMA would bring the 16,470 support level into play.

The 57.75 14-4 hour RSI indicates a DAX return to the 16,800 handle before entering overbought territory.

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