DAX Index: German Inflation and the US Jobs Report in Focus

Highlights

• The DAX slipped by 0.16% on Thursday, ending the session at 16,629.
• On Friday, German inflation figures for November need consideration.
• The US Jobs Report will be the main event of the session.

Overview of the DAX Performance on Thursday

The DAX slipped by 0.16% on Thursday. After a 0.75% gain on Wednesday, the DAX ended the session at 16,629. Significantly, the DAX ended a seven-day winning streak.

German Industrial Production Disappoints

On Thursday. economic indicators from Germany disappointed the markets for the second session. German industrial production unexpectedly declined in October. Production fell by 0.4% after a 1.3% decline in September.

The weaker-than-expected numbers contributed to an early loss.

Eurozone GDP numbers added to the negative sentiment. The Eurozone economy stalled year-over-year in Q3, a revision from 0.1% growth.

Earlier in the session, trade data from China set the tone. While exports unexpectedly rose, a decline in imports signaled a weak demand outlook. Concerns about the Chinese economy left the Asian equity markets in negative territory on Thursday, affecting market risk sentiment through the European session.

US Labor Market Stats Offered Comfort

On Thursday, the US labor market was in focus for the third consecutive session. Weaker-than-expected JOLTs job openings and ADP Employment numbers raised concerns about the US economy. However, initial jobless claims increased modestly last week, providing market relief.

Nonetheless, the numbers continued to support bets on a Q1 2024 Fed rate cut.

The US equity markets ended the Thursday session in positive territory. The Nasdaq Composite Index rallied 1.37%, with the Dow and the S&P 500 gaining 0.17% and 0.80%.

The Thursday Market Movers

Bank stocks were among the worst performers on a deteriorating outlook as central banks consider rate cuts. A lower interest rate environment impacts net interest margins and the bottom line. Commerzbank slid by 4.14%, with Deutsche Bank declining by 0.89%.

Retail stocks also stumbled on concerns about the euro area economy. Zalando and Adidas ended the session down 3.35% and 2.99%.

Auto stocks also struggled amidst the gloomy outlook as investors considered the economy. Porsche fell by 0.87%, with BMW and Volkswagen declining by 0.75% and 0.73%. Daimler Truck Holding and Mercedes Benz Group ended the session down 0.28% and 0.05%.

However, BASF was among the front-runners, gaining 1.47%. Revamp plans drew investor interest.

German Inflation in the Spotlight

On Friday, German inflation numbers for November warrant investor attention. Revision to preliminary numbers will move the dial. The markets expect the ECB to take a less hawkish rate path. Softer-than-expected numbers would support earlier discussions on interest rate cuts and the DAX.

According to preliminary numbers, the annual inflation rate softened from 3.8% to 3.2%

US Jobs Report in the Spotlight

On Friday, the US Jobs Report will be the main report of the day. Weaker-than-expected wage growth and an increase in the unemployment rate could cement bets on a Q1 2024 Fed rate cut. However, a marked deterioration in labor market conditions could spook investors and impact the DAX.

Economists forecast average hourly earnings to increase by 0.3% in November after rising by 0.2% in October. However, economists expect the US unemployment rate to hold steady at 3.9%. In line with or better than the forecast numbers could affect Fed rate hike bets.

While the Jobs Report will be the focal point, US consumer confidence figures also need consideration. A pickup in consumer confidence would ease fears of a hard landing. Economists forecast the Michigan US Consumer Sentiment Index to increase from 61.3 to 62.0 in December. Beyond the headline figure, the inflation component will also influence risk sentiment.

The futures markets pointed to a mixed start to the Friday session. The DAX was up 21 points, while the Nasdaq mini was down 16 points.

Short-Term Forecast

Near-term trends for the DAX will depend on the US Jobs Report. Softer-than-expected wage growth and a steady unemployment rate would support a Q1 2024 Fed Rate cut without spooking investors. Rising bets on a Fed rate cut could support a DAX move toward 17,000.

DAX Technical Indicators

Daily Chart

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

A DAX move through the Wednesday ATH of 16,727 would give the bulls a run at the 17,000 psychological resistance level.

The US Jobs Report will be the focal point on Friday.

However, a fall through the 16,470 support level would bring the 16,290 support level into play.

The 14-day RSI reading of 81.80 shows the DAX in overbought territory. Selling pressure could intensify at the Wednesday ATH of 16,727.

4-Hourly Chart

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

A DAX break above the Wednesday ATH of 16,727 would support a move to 17,000.

However, a drop below the 16,470 support level would give the bears a run at the 16,290 support level.

The 79.76 14-4 hour RSI shows the DAX in overbought territory. Selling pressure may intensify at the all-time high of 16,727.

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