DAX Index: German Producer Prices and ECB Chief Economist Philip Lane in Focus

Highlights

• The DAX rallied 0.84% on Friday, ending the session at 15,919.
• Rising bets on ECB and Fed rate cuts fueled support for DAX-listed stocks.
• On Monday, German producer prices and ECB speeches will be in focus.

Friday DAX Overview

The DAX rallied 0.84% on Friday. Following a 0.24% on Thursday, the DAX ended the day at 15,919.

Eurozone Inflation Softens to 2.9%

The Eurozone annual inflation rate softened from 4.3% to 2.9% in October 2023. The softer numbers supported market bets on the ECB cutting interest rates next year. German government bond yields and 10-year US Treasury yields tumbled early in the European session. The pullback in yields fueled buyer demand for riskier assets.

US Housing Sector Data Deliver Late Support

On Friday, better-than-expected US housing data drove buyer demand for riskier assets. The US housing sector remains a litmus test of the US economy, easing investor fears of a hard landing. However, the numbers failed to influence market bets on an H1 2024 Fed Rate cut.

On Friday, the Dow rose by 0.01%, with the Nasdaq Composite Index and S&P 500 seeing gains of 0.08% and 0.13%, respectively.

Fed speakers contributed to the rising bets on a Fed rate cut in March or May. FOMC voting member Austan Goolsbee expects a sharp fall in inflation, with Michael Barr seeing interest rates near the peak. Voting member Mary Daly called for patience on monetary policy given the increased uncertainty toward the US economic outlook.

The Friday Market Movers

Siemens Energy AG rallied 7.55% as investors responded further to the news of the government deal.

Deutsche Bank and Commerzbank gained 2.63% and 1.22%, tracking UBS into positive territory.

The risk-on sentiment supported the auto sector, with rising bets of central bank rate cuts a boon for car manufacturers. BMW and Mercedes Benz Group ended the day up 1.22% and 1.12%. Porsche and Volkswagen rose by 0.46% and 0.54%, with Daimler Truck Holding gaining 0.86%.

German Producer Prices and the ECB in the Spotlight

On Monday, German producer prices will draw investor interest. A less marked decline in producer prices could signal an improving demand environment. Economists forecast that producer prices will decrease by 11.0% year-over-year in October, compared to -14.7% in September.

Beyond the numbers, ECB Chief Economist Philip Lane is on the calendar to speak. Support to begin rate cut discussions would fuel the appetite for DAX-listed stocks.

Earlier today, the PBoC left Loan Prime Rates unchanged, in line with expectations. The Hang Seng Index enjoyed a positive start to the week, with pledges to support the Chinese real estate sector supporting riskier assets. Gains across the Asian equity markets could set the tone for the European session.

Fed Speakers in Focus

Later in the Monday session, investors must monitor Fed speakers. Support for a Fed pivot to begin discussing rate cuts would support riskier assets.

There are no US economic indicators to consider before the FOMC Meeting Minutes out on Tuesday.

The futures markets point to a mixed start to the Monday session. The DAX was up 18 points, while the Nasdaq mini was down by 40 points.

Short-Term Forecast

Neat-term trends hinge on central bank forward guidance. Rising bets on Fed and ECB rate cuts would support further gains. However, talk of a hard landing in the US and a prolonged economic recession across the euro area could cap the upside. Prelim private sector PMIs could prove pivotal this week.

DAX Technical Indicators

Daily Chart

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

A DAX break above the 16,004 resistance level would support a move toward the trend line.

Central bank commentary and German producer prices will be the focal points. Dovish ECB and Fed chatter and a modest rise in producer prices could support the DAX.

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

The 14-day RSI reading of 72.16 shows the DAX in overbought territory. Selling pressure could intensify at 16,000.

4-Hourly Chart

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

A break above the 16,004 resistance level would support a move toward the trend line.

However, a fall below the 15,800 handle would give the bears a run at the 15,694 support level.

The 82.74 14-4 hour RSI shows the DAX in overbought territory. Selling pressure will likely intensify at 16,000.

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