DAX Index: German Economy and Corporate Earnings in Focus

Highlights

• The DAX gained 0.35% on Friday, ending the session at 16,918.
• Corporate earnings delivered a fresh all-time high before US labor market data sank bets on a March Fed rate cut.
• On Monday, German trade data, services PMIs, and corporate earnings need consideration.

Overview of the DAX Performance on Friday

The DAX gained 0.35% on Friday. Reversing a 0.26% loss from Thursday, the DAX ended the Friday session at 16,918. Significantly, the DAX hit a fresh record high of 17,005 and ended a three-day losing streak.

Corporate Earnings Drove Buyer Demand for DAX-Listed Stocks

US corporate earnings influenced the tone of the European session on Friday. Apple Inc. (AAPL), Amazon.com Inc. (AMZN), and Meta Platforms Inc. (META) were among the big names to release earnings during US after-hours trading on Thursday. Better-than-expected earnings delivered an early surge in the DAX, reaching a record high of 17,005 before retracing.

Corporate earnings from Germany and the Eurozone contributed to pre-US session gains.

There were no euro area economic indicators for investors to consider.

US Economic Calendar: US Jobs Report Sunk Bets on a March Fed Rate Cut

On Friday, the US Jobs Report sank bets on a March Fed rate cut. Nonfarm payrolls jumped 353,000, with wage growth accelerating in January. Average hourly earnings rose by 4.5% year-over-year after increasing by 4.1% in December.

The US equity markets brushed aside the reduced bets on a March Fed rate cut. On Friday, the Nasdaq Composite Index and the S&P 500 gained 1.74% and 1.07%, respectively. The Dow rose by 0.35%.

According to the CME FedWatch Tool, the probability of a March Fed rate cut fell to 20% in response to the US Jobs Report. On Friday, January 26, the chances of a March Fed rate cut stood at 46.2%.

The Friday Market Movers

Deutsche Bank was among the front-runners, rallying 3.52%. European bank earnings result drove buyer appetite for German bank stocks. Commerzbank ended the session up 1.18%. Danske Bank surged 8.08% on fourth-quarter earnings and a share buyback announcement.

Mercedes Benz Group rallied 2.00% on better-than-expected free cash flow numbers, driving demand for auto stocks. Porsche and Volkswagen saw gains of 1.78% and 1.37%, respectively. BMW ended the session up 0.98%.

However, Siemens Healthineers coughed up earnings fueled gains from Thursday, sliding by 3.33%

The Monday Session: German Trade and Services PMI in Focus

On Monday, German trade data will garner investor interest. Economists forecast the German trade surplus to narrow from €20.4 billion to €18.8 billion in December. A larger-than-expected fall in exports could influence the buyer appetite for DAX-listed stocks. Economists expect exports to decline by 2% month-on-month.

Additionally, investors must consider the service sector PMI numbers for Germany and the Eurozone. According to preliminary numbers, the German Services PMI declined from 49.3 to 47.6 in January. Downward revisions to preliminary numbers could pressure the DAX. The Eurozone Services PMI declined from 48.8 to 48.4.

Beyond the economic calendar, investors must consider corporate earnings from Germany and Europe.

US Calendar: US ISM Non-Manufacturing PMI

On Monday, the US ISM Non-Manufacturing PMI will warrant investor attention. A better-than-expected ISM Non-Manufacturing PMI could further reduce bets on a March Fed rate cut. Economists forecast the ISM Non-Manufacturing PMI to increase from 50.6 to 52.0 in January. A pickup in service sector activity and higher input prices could reduce bets on a March Fed rate cut.

Beyond the economic calendar, investors must consider the US earnings calendar. Caterpillar (CAT), McDonald’s Corp. (MCD), and The Estee Lauder Companies Inc. (EL) are among the big names to release earnings on Monday.

Short-term Forecast

Near-term trends for the DAX will hinge on German trade data, services PMIs, and corporate earnings. Weaker-than-expected German trade and services PMIs could pressure the DAX before the US market opening bell.

In the futures markets, the DAX and the Nasdaq mini were down 28 and 59 points, respectively.

DAX Technical Indicators

Daily Chart

The DAX remained well above the 50-day and 200-day EMAs. The EMAs continued to affirm bullish price signals.

A DAX return to 17,000 would support a break above the December all-time high of 17,005.

On Monday, corporate earnings, German trade data, and services PMI numbers will be in focus.

However, a fall through the 16,850 handle would give the bears a run at the 16,750 handle.

The 14-day RSI at 60.47 suggests a DAX move to the ATH of 17,005 before entering overbought territory.

4-Hourly Chart

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

A DAX break above the Friday all-time high of 17,005 would bring 17,100 into view.

However, a fall through the 50-day EMA would support a move toward the 16,470 support level.

The 14-period 4-hour RSI at 54.87 indicates a DAX move through the ATH before entering overbought territory.