Dax Index News: Bullish Outlook as DAX Eyes 4-Day Rally on Trade and Fed Sentiment

DAX Eyes a Four-Day Winning Streak

DAX inches closer to record highs amid trade optimism and central bank bets. Chinese exports soared despite US tariffs, boosting risk sentiment. The DAX advanced 0.02% to 23,929 in early trading on Thursday, August 7, following the previous session’s 0.33% gain. Notably, the Index could stretch its winning streak to four sessions.

However, German economic indicators sent mixed signals ahead of the European session. Industrial production slid by 1.9% month-on-month (MoM) in June, reversing May’s 1.2% increase, aligning with a drop in factory orders.

In contrast, German exports rose 0.8% MoM in June after falling 1.4% in May, while imports jumped 4.2% (May: -3.8%). Demand from EU countries bolstered Germany’s trade terms. Notably, exports to the US fell 2.1%, while imports from the US surged 19.8%, potentially easing US-EU trade tensions.

The upbeat trade data and expectations of a Fed rate cut bolstered demand for German-listed stocks.

Mixed Earnings Results Cap Early Gains

Allianz SE jumped 4.16% after posting strong earnings results, lifting the broader sector. Hannover Re and Munich Re advanced 0.51% and 0.88%, respectively.

Auto shares contributed to the morning gains. Daimler Truck Holding climbed 0.53%, with BMW, Mercedes-Benz Group, Porsche, and Volkswagon also posting early gains.

However, Deutsche Telekom AG tumbled 5.22% despite meeting consensus on profits and raising its outlook. Rheinmetall AG led the losses, sliding 7.19% after leaving its forecast unchanged.

Corporate News and Fed Rate Hike Bets Lift US Equity Markets

US markets rallied on Wednesday, August 6, reversing their losses from the previous session. The Dow and the S&P 500 advanced 0.18% and 0.73%, respectively, while the Nasdaq Composite Index gained 1.21%.

Reports that Apple (AAPL) plans a $100 billion investment to boost its US manufacturing capabilities lifted sentiment. However, Arista Networks (ANET) led the gains, soaring 17.49% after announcing higher-than-consensus revenue projections.

Dovish Fed rhetoric raised expectations of a September Fed rate cut, contributing to overnight gains. According to the CME FedWatch Tool, the probability of a September rate cut rose from 92.9% on August 5 to 93.8% on August 6. Minneapolis Fed President Neil Kashkari reportedly supported a Fed rate cut to bolster a slowing US economy.

Markets Brace for US Labor Market Data and Fed Signals

Later in the Thursday session, the US labor market will be under the spotlight following the weaker Jobs Report.

Economists forecast initial jobless claims to rise from 218k (week ending July 26) to 221k (week ending August 2). A spike in jobless claims may revive fears of a US recession, potentially weighing on risk assets such as the DAX. However, a modest increase or lower claims could boost risk sentiment.

Additionally, quarterly unit labor costs and nonfarm productivity numbers may also influence sentiment toward the Fed rate path.

Beyond the data, investors should consider Fed commentary amid calls for monetary policy easing.

Near-Term Outlook

The DAX’s near-term outlook hinges on key US labor market data and central bank policy signals.

• Bearish Scenario: Strong US labor market data, US recession fears, or hawkish guidance from central banks could challenge the DAX’s advance. The DAX may drop toward 23,500, exposing the psychological 23,000 level.
• Bullish Scenario: Softer US labor market data or dovish policy cues could fuel buying momentum, lifting the DAX toward 24,500 and potentially the record high of 24,639.

DAX Technical Indicators

Daily Chart

Following the recent gains, the DAX trades above the 50-day and the 200-day Exponential Moving Averages (EMA). The EMAs indicate a bullish bias.

A breakout above 24,000 could pave the way toward the 24,500 level. A sustained move above 24,500 may enable the bulls to target the record high of 24,639.

On the downside, a break below the 50-day EMA may bring the 23,750 level into play.

Final Thoughts

Overall, the DAX sits at a potential breakout point. Trade headlines, key economic data, and central bank policy commentary will likely dictate the index’s next moves.

However, looking ahead, traders should monitor both technical and fundamental drivers and consult our economic calendar.