DAX Index: German Trade and Corporate Earnings in Focus Pre-US Jobs Report

Highlights

• The DAX rallied 1.48% on Thursday, ending the session at 15,144.
• Investors reacted to the Fed interest rate decision and the Fed Chair Powell press conference.
• On Friday, German trade data, the US Jobs Report, and US ISM Services PMI will be the focal points.

DAX Thursday Overview

The DAX rallied 1.48% on Thursday. Following a 0.76% rise on Wednesday, the DAX ended the day at 15,144.

US Federal Reserve and US Labor Market Delivered Support

On Thursday, the European markets reacted to the Fed interest rate decision and Fed Chair Powell press conference.

Investors brushed aside German unemployment and euro area manufacturing PMI numbers. However, US labor market figures provided late support. Weaker-than-expected unit labor costs and jobless claims eased bets on a December Fed rate hike.

On Thursday, the S&P 500 rallied 1.89%, with the Dow and the Nasdaq Composite Index rising by 1.70% and 1.78%.

The Thursday Market Movers

Tech stocks and the auto sector were among the front-runners, supported by easing bets on Fed rate hikes.

Volkswagen rallied 3.20%, with Mercedes Benz Group and Porsche rising by 2.77% and 2.59%. BMW ended the session up 2.35%.

However, Siemens Energy led the way, surging by 6.40%. Favorable assessments on selling the stake in Siemens Ltd contributed to the session gains.

However, Zalando tumbled by 6.29% on a weak clothing demand outlook and weaker-than-expected revenue.

German Trade Data in the Spotlight

On Friday, German trade data will set the tone for the European session. A marked narrowing in the trade surplus could fuel bets on a prolonged German recession. Economists forecast the German trade surplus to narrow from €16.6 billion to €16.3 billion in September. While the headline figure will influence, investors must consider exports and trade terms with the main trading partners.

Later in the morning session, Eurozone unemployment figures also need consideration. However, barring an expected rise in the unemployment rate, the numbers should have a limited impact on the DAX.

Beyond the economic calendar, corporate earnings results will move the dial. BMW, Vonovia, and Fresenius will release earnings results.

US Labor Market and Services in Focus

On Friday, the US Jobs Report and ISM Services PMI could close the door on the Fed rate hike cycle. Softer wage growth and a modest increase in nonfarm payrolls could give the Fed reason to hit the brakes in raising interest rates. The US GDP Report and labor market numbers from Thursday showed early signs of weakness in labor market conditions.

On Wednesday, Fed Chair Powell talked about needing softer labor market conditions to provide price stability.

Later in the European session, the US ISM Services PMI also warrants attention. An unexpected contraction in the US services sector could fuel fears of a hard landing.

The futures markets point to a mixed start to the Friday session. The DAX gained 77 points, with the Nasdaq mini down 41 points.

Short-Term Forecast

Corporate earnings and market sentiment toward central bank monetary policy remain the key drivers. Upbeat earnings and softer US labor market conditions could continue to support buyer demand for DAX-listed stocks.

DAX Technical Indicators

Daily Chart

The DAX sat below the 50-day and 200-day EMAs, sending bearish price signals.

A DAX break above the 15,247 resistance level and 50-day EMA would support a move to the 200-day EMA.

German corporate earnings, trade data and US stats will be the focal points.

However, a drop below 15,000 would give the bears a run at the 14,957 support level.

The 14-day RSI reading of 51.93 suggests a DAX break above the 50-day EMA before entering overbought territory.

4-Hourly Chart

The DAX sits above the 50-day EMA while remaining below the 200-day EMA, sending bullish near-term but bearish longer-term price signals. A DAX break above the 15,247 resistance level would support a run at the 200-day EMA.

However, a fall through the 50-day EMA would bring sub-15,000 and the 14,957 support level into play.

The 65.58 14-4 hour RSI reading suggests a DAX break above the 15,247 resistance level before entering overbought territory.

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