While economic indicators will influence risk sentiment, ECB and Fed speeches and corporate earnings remain in focus on Tuesday.
The DAX declined by 0.35% on Monday, ending the session at 15,136.
Euro area economic indicators and investor caution ahead of central bank speeches left the DAX in negative territory.
On Tuesday, German industrial production, Eurozone producer prices, and central bank speeches will be in focus.
Monday DAX Overview
The DAX declined by 0.35% on Monday. Reversing a 0.30% gain from Friday, the DAX ended the day at 15,136.
Euro Area Services PMIs Overshadow German Factory Orders
On Monday, German factory orders increased by 0.2% in September. Economists forecast a 1.0% decline following a 3.9% surge in August. The better-than-expected figures failed to counter the effects of euro area services PMIs.
In October, the German Services PMI fell from 50.3 to 48.2, with the Eurozone Services PMI down from 48.7 to 47.8. The services sector accounts for over 70% of the euro area economy. Weak PMI numbers continued to signal a euro area economic recession.
Investor caution was evident ahead of ECB and Fed speeches this week. The focus shifted from monetary policy expectations and earnings to the macroeconomic outlook. A gloomy economic outlook for the German and euro area economies could test the appetite for riskier assets.
Central bank speeches could also question the market bets on the Fed ending its rate hike cycle. For the ECB, producer prices and retail sales figures will keep inflation in focus.
On Monday, there were no US economic indicators to influence investor sentiment. The absence of economic statistics and corporate earnings reports had a neutral impact on the US equity markets.
On Monday, the Nasdaq Composite Index gained 0.30%, with the S&P 500 and the Dow rising by 0.18% and 0.10%.
The Monday Market Movers
On Tuesday, Vonovia gave up gains from Friday, sliding by 5.43%, with Siemens Energy AG ending the day down 1.68%. There were no further updates on a guarantee deal to drive demand for Siemens Energy AG, leading investors to lock in recent profits.
The auto sector had a mixed session. Continental and Mercedes Benz Group fell by 0.64% and 0.57%. Porsche and BMW saw losses of 0.11% and 0.13%. Volkswagen ended the day up 0.02%. However, Daimler Truck Holding declined by 0.77% before the earnings release on Tuesday.
German Industrial Production and Eurozone Producer Prices in Focus
On Tuesday, German industrial production and Eurozone producer prices will be in focus. A larger-than-expected fall in industrial production would align with the October Manufacturing PMI. Weak demand remains a bugbear for manufacturers. Economists forecast industrial production to fall by 0.1% in September, following a 0.2% decline in August.
Eurozone producer prices also need consideration. A more marked decline in year-on-year producer prices would affirm a weakening demand environment. However, a downward trend in producer prices may also ease pressure on the ECB to keep interest rates higher for longer. Producers pass costs onto consumers, influencing consumer price inflation.
With the German economy and Eurozone producer prices in focus, ECB commentary also needs monitoring. ECB Executive Board members Luis de Guindos, Elizabeth McCaul, and Andrea Enria are on the calendar to speak.
However, corporate earnings will influence auto sector stocks. Daimler Truck Holding will release earnings results on Tuesday.
FOMC Member Speeches May Spook Investors
Late in the European session, FOMC member speeches could test bets on the Fed ending its rate hike cycle. FOMC voting members Michael Barr and Christopher Waller will speak before the European closing bell. Hawkish comments regarding the US economy, inflation, and interest rates may impact market risk sentiment.
The futures markets point to a negative start to the Tuesday session. The DAX and the Nasdaq mini were down 18 and 25 points, respectively.
Near-term trends hinge on inflation and central bank speeches. Sticky inflation and hawkish chatter could force the DAX into retreat. The macroeconomic backdrop also remains a headwind for DAX-listed stocks.
DAX Technical Indicators
The DAX hovered below the 50-day and 200-day EMAs, sending bearish price signals.
A DAX break above the 15,247 resistance level and the 50-day EMA would support a move to the 200-day EMA.
German industrial production, Eurozone producer prices, and central bank speeches will be the focal points.
However, a fall through 15,000 would give the bears a run at the 14,957 support level.
The 14-day RSI reading of 51.37 suggests a DAX break above the 15,247 resistance level and the 50-day EMA before entering overbought territory.
DAX 071123 Daily Chart
The DAX holds above the 50-day EMA while remaining below the 200-day EMA, affirming bullish near-term but bearish longer-term price signals. A DAX break above the 15,247 resistance level would support a move to the 200-day EMA.
However, a fall through the 50-day EMA and the 14,957 support level would bring the 14,575 support level into view.
The 61.93 14-4 hour RSI reading suggests a DAX break above the 15,247 resistance level before entering overbought territory.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.