DAX Index: German Factory Orders and Services PMIs to Test the Bullish Sentiment

Highlights

• The DAX gained 0.30% on Friday, ending the session at 15,189.
• Euro area economic indicators capped gains on Friday, while corporate earnings and sentiment toward the Fed drove demand for DAX-listed stocks.
• On Monday, the German economy and euro area services will draw interest.

Friday DAX Overview

The DAX gained 0.30% on Friday. Following a 1.48% rally on Thursday, the DAX ended the day at 15,189.

Corporate Earnings Offset Impact of Weak Euro Area Economic Indicators

On Friday, German trade data sent a gloomy picture of the German economy. Exports tumbled by 2.4% in September, with imports falling by 1.7%. An unexpected rise in the Eurozone unemployment rate added to the negative market mood.

However, corporate earnings countered the impact of the economic indicators on the DAX. The German auto sector took center stage, with BMW delivering solid earnings results.

US Economic Indicators Close the Door on Fed Rate Hikes

On Friday, the US Jobs Report and service sector PMI numbers closed the door on Fed rate hikes. Softer wage growth and an unexpected rise in the unemployment rate reflected the effects of the Fed on the labor market. The lower numbers were timely for riskier assets. On Wednesday, Fed Chair Powell discussed the need for a weaker labor market to restore price stability.

The ISM Services PMI reported a slowdown in service sector activity. The weaker-than-expected numbers tested the appetite for riskier assets on fears the FED raised rates too aggressively.

On Friday, the Nasdaq Composite Index rallied 1.38%, with the S&P 500 and the Dow gaining 0.66% and 0.94%.

The Friday Market Movers

Siemens Energy led the way again, surging by 8.70%. Buyer demand increased due to reduced concerns about key customers ending contracts.

Zalando and Vonovia rallied 7.86% and 7.78%, respectively. Vonovia bounced on rental growth and asset sales, while Zalando found support from easing Fed fear.

The auto sector contributed to session gains. Porsche and BMW ended the session with gains of 2.56% and 2.04%. Volkswagen and Mercedes Benz Group rose by 2.00% and 0.66%, respectively.

German Factory Orders and Services PMIs in the Spotlight

On Monday, German factory orders and euro area services PMIs will draw investor attention. A slide in factory orders and weaker-than-expected services PMIs could test the appetite for DAX-listed stocks.

Economists forecast factory orders to decline by 1.0% in September (Aug: 3.9%). Service sector PMIs could have more influence. According to preliminary PMI surveys, the German Services PMI fell from 50.3 to 48.0 and the Eurozone’s from 48.7 to 47.8 in October. Revisions to preliminary figures need investor consideration.

There are no US economic indicators to influence market risk sentiment later in the Monday session.

However, corporate earnings will move the dial. Out of Germany, BioNTech is on the calendar to release earnings results.

The futures markets point to a testy start to the Monday session. The DAX and the Nasdaq mini were down 3 and 4 points, respectively.

Short-Term Forecast

Corporate earnings must continue to fuel the positive sentiment as the markets expect an end to the Fed rate hike cycle. However, euro area economic indicators remain a headwind for DAX-listed stocks. In the near term, a deteriorating macroeconomic environment across the euro area and the US needs consideration.

DAX Technical Indicators

Daily Chart

The DAX remained below the 50-day and 200-day EMAs, affirming bearish price signals.

A DAX move through the 15,247 resistance level and the 50-day EMA would give the bulls a run at the 200-day EMA.

German factory orders, euro area services PMIs, and corporate earnings will be the focal points.

However, a break below 15,000 would support a move to the 14,957 support level.

The 14-day RSI reading of 53.54 indicates a DAX move to the 200-day EMA before entering overbought territory.

4-Hourly Chart

The DAX remains above the 50-day EMA while sitting below the 200-day EMA, sending bullish near-term but bearish longer-term price signals. A DAX move through the 15,247 resistance level would bring the 200-day EMA into play.

However, a break below the 50-day EMA and the 14,957 support level would support a move toward the 14,575 support level.

The 67.45 14-4 hour RSI reading indicates a DAX move through the 15,247 resistance level before entering overbought territory.

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