DAX Index: German Inflation and US GDP Awaited

Highlights

• The DAX gained 0.16% on Tuesday, ending the session at 15,993.
• Dovish Fed comments and better-than-expected US consumer confidence delivered late support.
• On Wednesday, German inflation and the US economic calendar are focal points.

Tuesday DAX Overview

The DAX gained 0.16% on Tuesday. After a 0.39% loss on Monday, the DAX ended the session at 15,993.

German Consumer Confidence Improves

On Tuesday, the German economy was in the spotlight, with consumer confidence in focus. The GfK Consumer Confidence Index increased from -28.3 to -27.8 for December. While the improvement was modest, recent economic indicators suggest a possible shift in direction for the German economy.

However, hawkish ECB commentary continued to peg the DAX back from a breakout session. Resistance at 16,000 has left the DAX short of July 2023 levels.

US Consumer Confidence and Fed Speakers Offer Late Support

The US economic calendar countered hawkish ECB comments and the gloomy German economic outlook.

US consumer confidence declined modestly in November. An improvement in the Expectations Index was market-friendly despite lingering below the all-important 80 level.

Dovish Fed comments contributed to late gains for the DAX. FOMC voting member Christopher Waller offered the markets hope of an end to the Fed rate hike cycle. Waller also raised the bets on an H1 2024 Fed rate cut, suggesting softer inflation trends in the next three to five months could support a Fed rate cut.

The US equity markets reacted to the numbers and the Fed comments, with the Nasdaq Composite Index gaining 0.29%. On Tuesday, the Dow and S&P 500 rose by 0.24% and 0.10%, respectively. Notably, 10-year US Treasury yields ended the Tuesday session down 1.48% to 4.323%.

The Tuesday Market Movers

RWE AG rallied 3.05% on plans to increase real investments in green energy tech. A pullback in US Treasury yields supported the appetite for tech stocks. Infineon Technologies gained 2.01%,.

While Commerzbank and Deutsche Bank also ended the day in positive territory, auto and consumer stocks struggled.

European retailer Zalando SE was the worst performer on the DAX, sliding by 5.41%. Demand concerns impacted the auto sector. Volkswagen and Mercedes Benz Group ended the day down 0.98% and 0.69%. BMW (-0.29%) and Porsche (-0.65%) also saw losses, while Daimler Truck Holding ended the session flat.

BASF and Bayer declined by 3.49% and 1.13% as investors responded further to recent rating downgrades.

German Inflation and the ECB in Focus

On Wednesday, German inflation numbers for November will garner investor interest. Softer-than-expected figures could ease the need for a hawkish ECB rate path to tame inflation. A less hawkish ECB rate path could reduce borrowing costs and improve profit margins.

Economists forecast the annual inflation rate to soften from 3.8% to 3.5%.

With inflation in the spotlight, investors should monitor ECB commentary throughout the session.

US GDP and Fed Speakers in Focus

The US economic calendar also needs consideration. On Wednesday, the second estimated GDP number for the third quarter will draw investor interest. According to the first estimate, the US economy expanded by 4.9% in Q3. Revisions to the first estimate could influence market risk sentiment.

Beyond the headline figure, real disposable income and savings warrant investor attention. Downward revisions could raise fears of a hard landing.

Apart from the numbers, Fed speakers could also influence market risk sentiment.

The futures markets pointed to a positive start to the Wednesday session. The DAX and the Nasdaq mini were up 11 and 15 points, respectively.

Short-Term Forecast

Near-term trends remain hinged on inflation numbers and central bank responses. Softer inflation figures and rising bets on H1 2024 rate cuts could send the DAX toward recent highs.

DAX Technical Indicators

Daily Chart

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

A DAX move through the 16,004 resistance level would bring the 16,142 resistance level into play.

German inflation numbers, US GDP figures, and central bank commentary are in focus.

However, a drop through the 15,850 handle would support a fall toward the 15,694 support level.

The 14-day RSI reading of 70.75 shows the DAX in overbought territory. Selling pressure may intensify at 16,000.

4-Hourly Chart

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

A DAX break above the 16,004 resistance level would support a move to the 16,142 resistance level.

However, a drop below the 15,850 handle would bring the 15,694 support level into play.

The 67.05 14-4 hour RSI indicates a DAX move through the 16,004 resistance level before entering overbought territory.

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