DAX Index Forecast: German Prices and the ECB Stir Up DAX Market Excitement

Highlights

• The DAX gained by 0.60% on Thursday, ending the session at 17,047.
• On Friday, German wholesale prices and the ECB will need investor consideration.
• Later in the session, US producer prices, consumer sentiment, and Fed chatter also warrant investor attention.

Overview of the DAX Performance on Thursday

The DAX gained 0.60% on Thursday. Following a 0.38% rise on Wednesday, the DAX ended the session at 17,047. Significantly, the DAX climbed to a new all-time high of 17,089.

Eurozone Trade, ECB President Lagarde, and Corporate Earnings

On Thursday, Eurozone trade data drew investor interest. In December, the Eurozone trade surplus narrowed from €20.3 billion to €16.8 billion. Investors reacted to the weaker-than-expected numbers amidst the rising threat of a Eurozone recession.

Inflation and growth forecasts also influenced buyer demand for DAX-listed stocks. The European Commission released growth and inflation forecasts for 2024. The European Commission expected the eurozone economy to grow by 0.8% in 2024, down from 1.2% in the previous projection.

The Commission forecast Eurozone inflation to soften from 5.4% in 2023 to 2.7% in 2024, down from a previously forecasted 3.2%.

ECB President Lagarde failed to pour cold water on positive investor sentiment. The ECB President said inflation would continue to fall toward target over 2024. However, Lagarde also said the ECB must be confident that inflation will sustainably return to target before cutting rates.

Corporate earnings did drive buyer demand for DAX-listed stocks.

US Retail Sales Raise H1 2024 Fed Rate Cut Bets

On Thursday, US retail sales figures for January refueled bets on an H1 2024 Fed rate cut. Retail sales fell by 0.8% after rising 0.4% in December. A modest fall in jobless claims signaled stable labor market conditions. Initial jobless claims fell from 220k to 212k in the week ending February 10.

10-year US Treasury yields reacted to the retail sales figures, falling 0.54% to 4.236%. The pullback in yields drove demand for riskier assets.

On Thursday, the Nasdaq Composite gained 0.30%. The Dow and S&P 500 ended the day up 0.91% and 0.58%.

The Thursday Market Movers

Commerzbank led the way, rallying 5.53% as investors reacted to a 55% surge in 2023 net profit.

Auto stocks were also among the front-runners. Mercedes-Benz Group gained 2.01%. BMW and Porsche ended the day up 1.44% and 1.72%, respectively. Volkswagen rose by 1.19%. Better-than-expected earnings from Renault drove buyer demand for auto stocks.

However, Airbus Group declined by 1.00% after missing earnings forecasts.

German Wholesale Prices and the ECB in Focus

On Friday, German wholesale prices for January will garner investor interest. ECB President Lagarde talked about the ECB needing confidence about inflation sustainably returning to target. A larger-than-expected fall in wholesale prices could further ease demand-driven inflationary pressures.

Economists forecast German wholesale prices to decline by 2.5% year-over-year. In December, wholesale prices were down 2.6% year-on-year.

Beyond the inflation figures, investors must monitor ECB chatter. ECB Executive Board member Isabel Schnabel is on the calendar to speak. Support for ECB an interest rate cut in April would support the buyer appetite for DAX-listed stocks.

US Economic Data and Fed Speakers in Focus

Later in the European session, US producer prices and consumer sentiment also warrant investor attention. A more marked than forecast increase in producer prices could impact bets on an H1 2024 Fed rate cut. Economists forecast producer prices to increase by 0.1% in January after falling 0.1% in December.

An upward trend in producer prices and consumer confidence could fuel demand-driven inflation. Economists forecast the Michigan Consumer Sentiment Index to increase from 79 to 80 in February.

Beyond the numbers, FOMC member commentary could also move the dial. FOMC member Michael Barr is on the calendar to speak. Views on inflation and interest rates could influence market risk sentiment.

Short-term Forecast

Near-term trends for the DAX remain hinged on inflation-linked economic indicators and central bank commentary. Hotter-than-expected wholesale and producer prices could reduce bets on H1 2024 ECB and Fed rate cuts.

On Wednesday, the DAX futures and Nasdaq mini were up 54 and 28 points, respectively.

DAX Technical Indicators

Daily Chart

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

A DAX break above the Thursday all-time high of 17,089 would support a move through the 17,100 handle.

On Friday, inflation-linked economic indicators and central bank commentary need consideration.

However, a drop below the 17,000 handle would bring sub-16,900 levels into play.

The 14-day RSI at 59.97 suggests a DAX break above 17,100 before entering overbought territory.

4-Hourly Chart

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

A DAX move through the all-time high of 17,089 would bring the 17,100 handle into play.

However, a drop below the 17,000 handle would give the bears a run at the 50-day EMA.

The 14-period 4-hour RSI at 59.25 indicates a move through the 17,100 handle before entering overbought territory.