DAX Index: Futures Signal Early Gains with the German Economy in Focus

Highlights

• The DAX gained 0.74% on Monday, ending the session at 16,717.
• Better-than-expected German trade data and softer-than-expected US consumer inflation expectations influenced.
• On Tuesday, the markets will focus on German industrial production and Eurozone unemployment numbers.

Overview of the DAX Performance on Monday

The DAX gained 0.74% on Monday. Reversing a 0.14% loss from Friday, the DAX ended the Monday session at 16,717.

German Factory Orders and Trade Terms

On Monday, economic indicators from Germany sent mixed signals. Factory orders rose modestly but fell short of forecasts. However, trade data revealed a pickup in global demand, cushioning the impact of the factory order numbers. Exports increased by 3.7%, with imports up 1.9% in November.

However, the Sentix Indicator for January continued to signal a German recession, impacting demand for DAX-listed stocks.

US Consumer Inflation Expectations Fuel Late Rally

On Monday, US Consumer Inflation Expectations decreased from 3.4% to 3.0% in December. Economists forecast a modest fall to 3.3%. The softer inflation outlook for the next 12 months supported the appetite for riskier assets. Investors were more sensitive to the numbers, with the US CPI Report out on Thursday.

The DAX recovered from a session low of 16,518 to end the day at a high. 10-year US Treasury yields fell for the first time in three sessions, ending at 4.032%.

On Monday, the S&P 500 and the Nasdaq Composite Index rallied 1.41% and 2.20%, respectively. The Dow gained 0.58%.

The Monday Market Movers

Siemens Energy AG and Infineon Technologies rallied 5.25% and 1.98%, respectively, on the Nasdaq gains. Airbus Group ended the day up 2.56% as investors reacted to the latest problems at Boeing.

Improved sentiment supported retail-orientate stocks. Online retailer Zalando SE gained 1.50%, with Adidas ending the day up 1.88%.

Autos also ended the day in positive territory. Better-than-expected trade data drove demand for auto stocks. Mercedes-Benz Group and Porsche rose by 1.61% and 1.17%, respectively. Volkswagen and BMW saw gains of 0.65% and 0.54%, respectively.

German Economy in the Spotlight

On Tuesday, German industrial production will be in focus. After mixed stats from Monday, a larger-than-expected increase in industrial production could ease fears of a German recession. Economists forecast German industrial production to increase by 0.2% in November after falling 0.4% in October.

Later in the session, investors must consider Eurozone unemployment figures. However, barring a marked increase in the unemployment rate, the numbers should have a limited impact on the DAX. Economists forecast the unemployment rate to remain unchanged at 6.5% in November.

Beyond the numbers, ECB commentary needs monitoring. References to inflation, the economy, and interest rates would move the dial.

US Economic Calendar: US Economic Optimism and Trade

Later in the Tuesday session, US trade data and economic optimism figures warrant investor attention. However, the economic optimism numbers should have more impact. A rising trend in the RCM/TIPP Economic Optimism Index could bolster confidence in a soft landing for the US. Economists forecast the RCM/TIPP Economic Optimism Index to increase from 40 to 42 in January.

However, investors must also consider FOMC member commentary. Reactions to the US Jobs Report would move the dial.

In the futures, the DAX was up 44 points, while the Nasdaq mini was down 19 points.

Short-Term Forecast

Near-term DAX trends will remain hinged on German economic indicators and the US CPI Report. Better-than-expected German stats and softer US inflationary pressures could support the buyer demand for DAX-listed stocks.

DAX Technical Indicators

Daily Chart

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

A DAX break above the January 2 high of 16,964 would support a move to the all-time high (AHT) of 17,003.

Economic indicators for Germany, the Eurozone, and US and central bank commentary are in focus.

However, a drop below the 16,600 handle would give the bears a run at the 16,470 support level.

The 14-day RSI reading of 61.54 suggests a DAX move to the 17,000 handle before entering overbought territory.

4-Hourly Chart

The DAX sat above the 50-day and 200-day EMAs, confirming bullish price trends.

A DAX break above the January 2 high of 16,964 would give the bulls a run at the ATH of 17,003.

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

The 55.16 14-4 hour RSI indicates a DAX return to the 17,000 handle before entering overbought territory.

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