DAX Index: German Factory Orders and Earnings in the Spotlight

Highlights

• The DAX declined by 0.08% on Monday, ending the session at 16,904.
• Economic data from Germany, a hawkish Fed Chair, and US service sector data left the DAX in negative territory.
• On Tuesday, German factory orders, corporate earnings, and the US economic calendar need consideration.

Overview of the DAX Performance on Monday

The DAX declined by 0.08% on Monday. Partially reversing a 0.35% gain from Friday, the DAX ended the Monday session at 16,904.

German Trade Data Sent Recessionary Signals

On Monday, German trade data signaled a weakening demand environment. Imports tumbled by 6.7%, with exports down 4.6% in December. Germany has a trade-to-GDP ratio above 90%. Weak demand for German goods would adversely affect the German economy.

However, better-than-expected service sector PMI numbers offered mid-session support. The German Services PMI declined from 49.3 to 47.7 in January, up from a prelim 47.6. Notably, the Eurozone Services PMI slipped from 48.8 to 48.4.

Euro area corporate earnings results also influenced buyer demand for DAX-listed stocks.

US ISM Services PMI Numbers and Fed Chair Powell Impact Riskier Assets

On Monday, US service sector data impacted investor bets on a March Fed rate cut. The ISM Services PMI increased from 50.6 to 53.4 in January. In January, the ISM Services Prices jumped from 57.4 to 64.0, with the ISM Services Employment up from 43.3 to 50.5.

Hotter-than-expected US economic indicators sent 10-year US Treasury yields higher. 10-year US Treasury yields rose by 3.38%, ending the session at 4.160%. Fed Chair Powell contributed to the upswing. Powell warned the Fed is not considering near-term rate cuts, pressuring riskier assets.

On Monday, the Nasdaq Composite Index and the S&P 500 fell by 0.20% and 0.32%, respectively. The Dow ended the session down 0.71%.

US corporate earnings played second fiddle to Fed Chair Powell and the US economic calendar.

The Monday Market Movers

Deutsche Bank coughed up gains from Friday, ending the session down 2.74%. Reports of Iran circumventing sanctions via European banks and mixed earnings contributed to the loss.

Trade data from Germany impacted the auto sector. Mercedes Benz Group and Porsche declined by 1.80% and 1.51%, respectively. BMW and Volkswagen fell by 1.44% and 0.60%, respectively.

However, Infineon Technologies was among the front-runners, rallying 3.12%. Bets on better-than-expected earnings results on Tuesday likely contributed.

The Tuesday Session: German Factory Orders and the ECB in Focus

On Tuesday, German factory orders will draw investor interest. An unexpected fall in factory orders could affect investor sentiment. Economists forecast factory orders to stall in December after rising by 0.3% in November.

Later in the session, Eurozone retail sales data also needs consideration. A larger-than-expected decline in retail sales could fuel fears of a Eurozone recession. Economists expect retail sales to decline by 1.0% in December after falling 0.3% in November.

Away from the numbers, investors must track corporate earnings. Infineon Technologies is among the big names to release earnings on Tuesday.

US Calendar: US Economic Sentiment and Fed Chatter

On Tuesday, consumer sentiment toward the US economy will be in focus. Economists forecast the RCM/TIPP Economic Optimism Index to increase from 44.7 to 45.2 for February. Recent US economic indicators reflected a robust US economy. Tight labor market conditions and wage growth figures suggest improving consumer sentiment trends.

Beyond the numbers, investors must monitor FOMC member commentary. FOMC member Loretta Mester is on the calendar to speak on Tuesday.

However, investors must also consider the US earnings calendar. Ford Motor Co. (F) and Eli Lilly and Co. (LLY) are among the big names to release earnings results.

Short-term Forecast

Near-term trends for the DAX will hinge on German economic indicators, central bank chatter, and corporate earnings. Hawkish Fed commentary and weaker data from the Germany could pressure the DAX. However, rising bets on an April ECB rate cut and corporate earnings could offset the influences of the Fed.

In the futures markets, the DAX was down 21 points, while the Nasdaq mini was up 7 points.

DAX Technical Indicators

Daily Chart

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

A DAX move to 17,000 would support a breakout from the February all-time high of 17,005.

On Tuesday, German factory orders, corporate earnings, and the US economic calendar need consideration.

However, a break below the 16,850 handle would bring the 16,750 handle into play.

The 14-day RSI at 59.58 indicates a DAX break above the ATH of 17,005 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 return to the February all-time high of 17,005 would bring 17,100 into view.

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

The 14-period 4-hour RSI at 52.58 suggests a DAX break above the ATH before entering overbought territory.