DAX Index: Manufacturing PMIs, the ECB, and the Fed in the Spotlight

Highlights

• The DAX gained 0.30% on Thursday, ending the session at 16,215.
• Softer-than-expected Eurozone inflation figures raised bets on H1 2024 ECB rate cuts, supporting DAX-listed stocks.
• On Friday, Euro area and US manufacturing PMIs and Fed Chair Powell are focal points.

Thursday DAX Overview

The DAX gained 0.30% on Thursday. Following a 1.09% rally on Wednesday, the DAX ended the session at 16,215.

Eurozone Inflation Fuels Bets on ECB Rate Cut

On Thursday, Eurozone inflation figures raised bets on the ECB cutting rates in H1 2024. The annual core inflation rate softened from 4.2% to 3.6% in November. Investors brushed aside disappointing German unemployment and French GDP numbers.

An ECB rate cut would ease borrowing costs, supporting business investment, including hiring.

US Inflation and Personal Income/Spending Supported Gains

The heavily anticipated US inflation and personal income/spending numbers were DAX-friendly. Inflation softened in November, with personal income and spending numbers also supporting bets on an H1 2024 Fed rate cut.

However, the 10-year US Treasury yields and a mixed US equity market session left the DAX with modest gains. On Thursday, the Dow and S&P 500 gained 1.47% and 0.38%, while the Nasdaq Composite Index fell by 0.23%.

The Thursday Market Movers

It was a mixed session for the financial and auto sectors.

Deutsche Bank gained 1.37%, while Commerzbank ended the session down 0.53%.

Porsche fell by 0.77%, with BMW and Volkswagen declining by 0.50% and 0.43%. Mercedes Benz Group bucked the trend, rising by 0.49%.

However, Zalando SE gave up some of the previous session’s gains, falling 1.00%, with Adidas down 0.30%.

Eurozone Manufacturing and the ECB in Focus

On Friday, euro area manufacturing sector PMIs will draw investor interest. As investors raise bets on an H1 2024 ECB rate cut, the focus may return to the euro area economy. Weaker-than-expected numbers could impact the appetite for riskier assets.

According to prelim numbers, the German Manufacturing PMI increased from 40.8 to 42.3 in November. The Eurozone Manufacturing PMI rose from 43.1 to 43.8.

With the manufacturing sector in focus, ECB commentary also warrants consideration. ECB President Christine Lagarde is on the calendar to speak. Comments relating to the inflation numbers and interest rates would move the dial.

Fed Chair Powell and US Manufacturing in Focus

On Friday, US manufacturing sector PMI numbers will also draw investor attention. The ISM Manufacturing PMI will likely have more influence. Economists forecast the PMI to increase from 46.7 to 47.6.

Beyond the headline PMI number, investors must also consider the sub-components, including prices, new orders, and employment.

While the numbers will draw interest, a Fed Chair Powell speech will likely be the main event. Investors must monitor any reaction to the recent US GDP and inflation numbers.

The futures markets pointed to a mixed start to the Friday session. The DAX was up 69 points, while the Nasdaq mini was down 34 points. China and Manufacturing PMI numbers were in focus earlier today.

Short-Term Forecast

Near-term trends will hinge on central bank reactions to the latest inflation reports. Fed Chair Powell support for an H1 Fed rate cut and optimism toward a soft landing could support a run at 16,300. However, euro area economic woes remain a headwind.

DAX Technical Indicators

Daily Chart

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

A DAX move through the Thursday high of 16,263 would support a break above the 16,290 resistance level.

Eurozone and US manufacturing PMI numbers and Fed Chair Powell are the focal points on Friday.

However, a fall through the 16,142 support level would bring the 16,004 support level and sub-16,000 into view.

The 14-day RSI reading of 76.16 shows the DAX in overbought territory. Selling pressure could intensify at the 16,290 resistance level.

4-Hourly Chart

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

A DAX move through the Thursday high of 16,263 would bring the 16,290 resistance level and 16,300 into play.

However, a break below the 16,142 support level would give the bears a run at the 16,004 support level.

The 76.16 14-4 hour RSI shows the DAX in overbought territory. Selling pressure could intensify at the 16,290 resistance level.

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