DAX Index: Manufacturing PMIs and Fed Chair Powell in the Spotlight

Highlights

• The DAX gained 0.41% on Friday, ending the week at 15,387.
• Commerzbank soared 11.08% amid positive investor reactions to payout plans.
• US government avoids shutdown, offering early support to DAX, while China’s Caixin Manufacturing and Services PMIs dip in September.

DAX Friday Overview

On Friday, the DAX rose by 0.41%. Following a 0.70% gain on Thursday, the DAX ended the day at 15,387.

Softer Inflation Offers Hope of Less Hawkish ECB and Fed Rate Paths

German economic indicators sent mixed signals on Friday. Retail sales tumbled by 1.2% vs. forecasts of a 0.5% increase. Consumers reined in spending for a third consecutive month. Economic uncertainty, inflation, and elevated interest rates hit spending on non-essential items.

However, German unemployment figures and Eurozone inflation numbers provided support.

Later in the session, softer US inflation and personal spending figures eased bets on further Fed rate hikes.

The US equity markets responded to the economic indicators. On Friday, the NASDAQ Composite Index gained 0.14%. However, the S&P 500 and the Dow ended the day with losses of 0.27% and 0.47%, respectively. Fears of a US government shutdown weighed on buyer appetite.

The Friday Market Movers

Commerzbank notably surged by 11.08%, with investors reacting positively to plans aimed at boosting returns on profits. According to the newly introduced Capital Return Policy, the company commits to a pay-out ratio of at least 70% for 2024.

Adidas rallied 6.22% on Nike (NKE) earnings results from Thursday.

Euro Area Manufacturing in the Spotlight

Manufacturing PMI numbers from Italy and finalized PMIs for France, Germany, and the Eurozone will garner interest today.

However, barring marked revisions to the French and German PMIs, the PMIs for Italy and the Eurozone will have more influence.

Economists forecast the HCOB Italy Manufacturing PMI to increase from 45.4 to 45.7. According to prelim numbers, the HCOB Manufacturing PMI for the Eurozone slipped from 43.5 to 43.4.

Other economic indicators from the euro area include unemployment numbers for the Eurozone. A steady unemployment rate of 6.4% should have a limited impact on the DAX.

After the recent inflation figures from the euro area, ECB commentary will also draw interest. ECB Executive Board member Luis de Guindos is on the calendar to speak today. Suggestions of a move away from the need for higher-for-longer interest rates will offer support.

US ISM Manufacturing PMI and Fed Chair Powell in Focus

US ISM Manufacturing PMI numbers for September need consideration today. Economists forecast an increase from 47.6 to 47.8. However, sub-components of the PMI will also influence the DAX. Marked prices and employment PMI falls would ease bets on further Fed rate hikes.

Fed Chair Powell may offer insights following the recent US inflation numbers. Powell speaks after PMI survey release.

The DAX and NASDAQ mini were up 85 and 140 points this morning. Investor relief over the US government averting a shutdown will likely offer early support. However, weaker-than-expected Caixin Manufacturing and Services PMIs for China will influence investor sentiment.

The Caixin Manufacturing PMI fell from 51.0 to 50.6 in September, with the Services PMI down from 51.8 to 50.2.

Short-Term Forecast

Investor relief over the US government funding gap and the softer inflation environment are tailwinds. However, China’s economic woes, the lingering threat of a prolonged German recession, and a hawkish Fed interest rate path will continue to cap short-term gains.

DAX Technical Indicators

Daily Chart

The DAX sat below the 50-day and 200-day EMAs, affirming bearish price signals. A break above the 15,459 resistance level and 200-day EMA would support a move to the 15,619 resistance level. Selling pressure will likely intensify at 15,460. The 200-day EMA is confluent with the 15,459 resistance level.

Better-than-expected euro area PMIs and a less hawkish Fed Chair will likely support a breakout.

However, weak US and euro area PMIs and a hawkish Fed Chair would bring the 15,245 support level into play.

The 14-Daily RSI reading of 39.91 suggests a DAX fall to the 15,245 support level before entering oversold territory.

4-Hourly Chart

The DAX, sitting below the 50-day and 200-day EMAs, reaffirms bearish price signals. A DAX break above the 15,459 resistance level would support a move to the 50-day EMA.

However, a drop below 15,350 would give the bears a run at the 15,245 support level.

The 45.38 RSI reading indicates a DAX fall to the 15,245 support level before reentering the oversold territory.

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