DAX Index: Futures Signal a Positive Open with Private Sector PMIs in Focus

Highlights

• The DAX slipped by 0.08% on Thursday, ending the session at 16,752.
• Investors reacted to the dovish FOMC projections, sending the DAX to an all-time high of 17,003.
• On Friday, private sector PMIs from the euro area and the US will draw investor interest.

Overview of the DAX Performance on Thursday

The DAX slipped by 0.08% on Thursday. Following a 0.15% loss on Wednesday, the DAX ended the Thursday session at 16,752. Significantly, the DAX struck a new All-Time High (ATH) of 17,003 before a late pullback.

ECB Poured Cold Water on Rate Cut Bets

On Thursday, the ECB left interest rates unchanged at 4.5%. Economic forecasts were market-friendly, with Eurosystem staff expecting inflation to soften to 2.7% in 2024 and 2.1% in 2025. However, the ECB shied away from rate cut discussions, pulling the DAX into negative territory.

The lack of discussion about interest rate cuts contrasted with the FOMC projections that signaled four rate cuts in 2024.

US Economic Indicators Ease Fears of a Hard Landing

US retail sales and initial jobless claims drew interest on Thursday. Better-than-expected numbers eased fears of a hard landing. However, the unexpected rise in retail sales and tighter labor market conditions failed to spook investors. A pickup in consumption could fuel demand-driven inflation and force the Fed to delay rate cuts.

On Thursday, the Dow gained 0.43%, with the Nasdaq Composite Index and the S&P 500 ending the day up 0.19% and 0.26%, respectively.

The Thursday Market Movers

Investors reacted to the dovish FOMC projections, the downward revision to euro area inflation, and bets on a Q1 2024 ECB rate cut.

Zalando SE and Siemens Energy AG recovered recent losses, surging by 9.14% and 9.06%, respectively.

Auto stocks were also among the best performers. Porsche rallied 4.09%, with Daimler Truck Holding and BMW gaining 3.88% and 2.86%, respectively. Mercedes Benz Group and Volkswagen ended the day up 2.85% and 1.28%, respectively.

However, Hannover Rueck SE and Munich Re Group stumbled by 5.72% and 5.71%, respectively.

Euro Area Private Sector PMIs in Focus

On Friday, private sector PMIs for France, Germany, and the Eurozone will draw investor interest. Continued improvement across the private sector would support the buyer appetite for DAX-listed stocks. Economists expect manufacturing and services PMIs for France and Germany to climb higher in December.

Significantly, economists expect the Eurozone Services PMI to increase from 48.7 to 49.0 and the Manufacturing PMI to rise from 44.2 to 44.6. However, investors must consider the sub-components, including prices and employment. A pickup in price pressures could reduce bets on a Q1 2024 ECB rate cut and weigh on the DAX.

US Services in Focus

Later in the Friday session, US private sector PMI numbers also warrant consideration. A pickup in service sector activity should support the appetite for riskier assets. However, the survey must reveal softer price pressures to support the dovish FOMC Fed Funds Rate projections.

Economists forecast the US Services PMI to fall from 50.8 to 50.6 in December. Other stats include industrial production and NY Empire State Manufacturing Index numbers. However, these could play second fiddle to the private sector PMIs.

The futures markets pointed to a positive start to the Friday session. The DAX and the Nasdaq mini were up 11 and 19 points, respectively.

Short-Term Forecast

DAX trends will likely hinge on the private sector PMIs. A pickup in service sector activity but a easing price pressures would be a boon for DAX-listed stocks. Falling prices across the services sector would support a Q1 2024 ECB rate cut.

DAX Technical Indicators

Daily Chart

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

A DAX return to 16,850 would bring the Thursday ATH 17,003 into play.

The US and euro area private sector PMIs are focal points.

However, a break below the 16,750 handle would give the bears a run at the 16,470 support level.

The 14-day RSI reading of 80.78 shows the DAX in overbought territory. Selling pressure could intensify at the Thursday ATH of 17,003.

4-Hourly Chart

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

A DAX break above 16,850 would give the bulls a run at the Thursday ATH 17,003.

However, a fall below the 16,750 handle would bring the 16,470 support level into play.

The 61.51 14-4 hour RSI suggests a DAX break above the Thursday ATH of 17,003 before entering overbought territory.

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