DAX Index: Futures Point to a Positive Open and a New All-Time High

Highlights

• The DAX increased by 0.78% on Tuesday, ending the session at 16,533.
• On Tuesday, the DAX hit a new all-time high of 16,551 on dovish ECB chatter and a slump in government bond yields.
• German factory orders and US ADP Employment Change figures are focal points on Wednesday.

Overview of the DAX Performance on Tuesday

The DAX rose by 0.78% on Tuesday. Following a 0.04% gain on Monday, the DAX ended the Monday session at 16,533.

Euro Area Services PMIs and the ECB

On Tuesday, better-than-expected Services PMIs for November drove demand for riskier assets. The latest private sector PMIs eased fears of a prolonged euro area economic recession.

The Eurozone Services PMI increased from 47.8 to 48.7 in November, up from a preliminary 48.2. Significantly, the German Services PMI rose from 48.2 to 49.6 vs. a flash reading of 48.7.

However, the ECB also fueled demand for DAX-listed stocks. ECB Executive Board member Isabel Schnabel, previously an ECB hawk, reportedly said,

“The most recent inflation number has made a further rate increase rather unlikely.”

US Economic Indicators Offered a Bullish Cocktail

On Tuesday, US economic indicators delivered late support. A larger-than-forecast fall in job openings supported bets on a Q1 2024 Fed rate cut. However, better-than-expected service sector PMI numbers eased fears of a hard landing.

JOLTs job openings fell from 9.35 million to 8.733 million in October. Economists forecast a fall to 9.3 million.

The all-important ISM Non-Manufacturing PMI increased from 51.8 to 52.7 in November. Economists forecast an increase to 52.0.

On Tuesday, the Nasdaq Composite Index gained 0.31%, supported by a slide in US Treasury yields. 10-year Treasury yields ended Tuesday down 2.11% to 4.167%. However, the Dow and the S&P 500 declined by 0.22% and 0.06%, respectively.

The Tuesday Market Movers

Auto stocks were among the top performers, fueled by improving sentiment toward the euro area economy and ECB policy chatter.

Daimler Truck Holding rallied 3.43%, with BMW and Mercedes Benz Group seeing gains of 1.56% and 1.54%. Porsche and Volkswagen ended the day up 1.19% and 0.71%, respectively.

Bank stocks saw relatively modest gains. Deutsche Bank and Commerzbank increased by 0.35% and 0.09%, respectively.

German Factory Orders and Eurozone Retail Sales in Focus

On Wednesday, German factory orders and Eurozone retail sales figures will garner investor interest. A larger-than-expected rise in factory orders would support the improving sentiment toward the German economy. Economists forecast factory orders to increase by 0.2% in October. In September, factory orders rose by 0.2%.

Eurozone retail sales could also move the dial. A pickup in consumer spending would signal an improving consumer confidence trend and support a positive consumption outlook. Private consumption contributes over 50% to the economy. Economists forecast retail sales to increase by 0.2% in October after falling by 0.3% in September.

Following the market reaction to the comments from ECB Isabel Schnabel, investors should continue to monitor ECB chatter. Comments favoring an end to the ECB rate hike cycle and rate cuts would support DAX-listed stocks.

US ADP Employment Change in the Spotlight

On Wednesday, ADP Employment Change figures will warrant investor attention. A weaker-than-expected rise in employment would support investor bets on a Q1 2024 Fed rate cut. Deteriorating labor market conditions could affect wage growth and consumer confidence. The net effect could be a pullback in spending.

A downward trend in spending could dampen demand-driven inflationary pressures and the need for a hawkish Fed rate path.

Economists expect the ADP to report a 130k increase in employment in November. In October, the ADP reported a 113k rise in employment.

The futures markets pointed to a positive start to the Wednesday session. The DAX and the Nasdaq mini were up 58 points and 69 points, respectively.

Short-Term Forecast

Near-term trends for the DAX will hinge on US labor market numbers and central bank commentary. Weaker-than-expected ADP numbers (Wed) and softer US wage growth (Fri) could support bets on a Q1 2024 Fed rate cut, a boon for riskier assets.

DAX Technical Indicators

Daily Chart

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

A DAX breakout from the Tuesday high of 16,551 would support a move toward the 16,750 handle.

Euro area economic indicators, the US labor market, and central bank commentary will influence buyer demand.

However, a break below the 16,470 support level would give the bulls a run at the 16,290 support level.

The 14-day RSI reading of 81.95 shows the DAX in overbought territory. Selling pressure could intensify at the Tuesday high of 16,551.

4-Hourly Chart

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

A DAX move through the Tuesday high of 16,551 would give the bulls a run at the 16,750 handle.

However, a break below the 16,470 support level would bring the 16,290 support level into view.

The 85.62 14-4 hour RSI shows the DAX in overbought territory. Selling pressure may intensify at the all-time high of 16,551.

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