Dax Index News: Bullish Outlook Today as US-EU Trade Deal Boosts Market Sentiment

DAX Faces Crucial Test as US-EU Trade Pact Nears

With a record-breaking EU-US trade deal on the line, DAX investors braced for potential market-moving headlines. While the US reached trade agreements with Japan, Indonesia, and the Philippines, the lack of progress on a US-EU deal eased demand for DAX-listed stocks. The DAX fell 0.32%, reversing Thursday’s 0.23% gain to close at 24,218.

The EU looked set to accept a 15% US tariff and potentially zero tariffs on US goods. While punitive, the EU could avoid a more penalizing 30% tariff, giving investor relief.

Europe macro specialist Daniel Kral suggested two potential outcomes to the trade talks:

“Alternatives are 1) retaliate and risk a China-style escalatory dynamic with the US security umbrella thrown in the mix 2) not retaliate, negotiate the lowest blanket tariff and sectoral exemptions that will be a floor for future deals. EU can ill afford a full-blown trade war.”

Sector Snapshot: Earnings Mixed

Puma plunged 18.7% on July 25 after missing earnings forecasts and cutting its full-year outlook. However, LVMH boosted demand for retail stocks after signaling a potential recovery in the Chinese retail space. Adidas and Zalando gained 0.23% and 0.48%, respectively.

Auto stocks led the gains on the DAX. Volkswagen surged 4.55% after the company’s CEO signaled plans to accelerate cost-cutting efforts to offset the effect of tariffs. Porsche rallied 3.11%, with BMW and Mercedes-Benz Group also posting strong gains.

US and EU Reach Trade Deal: DAX Set to Rally

The US and the EU crucially reached a trade agreement on Sunday, July 27, averting the threat of a 30-50% US tariff on EU goods. The deal will likely lift sentiment on Monday, July 28. Details of the agreement included:

• A 15% US tariff on most EU goods, bringing levies on the auto sector down from 27.5%.
• Zero tariffs on strategic goods, including aircraft components, semiconductors, generic pharmaceuticals, selected chemicals, critical raw materials, and some agricultural goods.
• The 50% US tariff on aluminum and steel remains unchanged, but could shift to a quota-based system at a later date.
• EU to invest $600 billion in US assets, and purchase around $750 billion in US energy, including LNG, during the remainder of Trump’s second term.
• No retaliatory tariffs on US goods. The EU will incorporate US industrial and auto standards in some sectors.

While the EU averted a full-blown trade war, the deal heavily favors the US. Nevertheless, German auto, aircraft-linked, pharma, and tech stocks could potentially see the strongest gains.

EU Commission President Ursula von der Leyen remarked:

“Together, the EU and the US are a market of 800 million people. And nearly 44 percent of global GDP. It’s the biggest trade deal ever.”

Wall Street Advances on Optimism Toward a US-EU Trade Deal

US markets posted gains on July 25, as hopes for a US-EU trade agreement bolstered demand for risk assets. The Nasdaq Composite Index and the S&P 500 closed at record highs after rising 0.24% and 0.40%, respectively, while the Dow climbed 0.47%.

Decker Outdoor (DECK) jumped 11.35% after beating quarterly earnings estimates. However, Intel (INTC) plunged 8.53% after the firm signaled sharper quarterly losses and warned of job cuts.

US Dallas Fed Manufacturing Index in Focus

Later in the Monday session, US economic data also requires consideration as Wednesday’s Fed interest rate decision looms.

Economists forecast the Dallas Fed Manufacturing Index to rise from -12.7 in June to -8 in July. A higher Index reading could signal improving demand after Friday’s upbeat durable goods orders ex transportation numbers. Easing recession risks may boost demand for risk assets such as the DAX. Investors may brush aside a weaker print after the trade deal.

Outlook: Key Catalysts for the DAX

The DAX’s near-term outlook hinges on the US-EU trade deal, US data, and ECB commentary.

• Bullish Case: A US-EU trade deal, upbeat US data, and dovish central bank rhetoric. These factors could drive the DAX toward its record high of 24,639 and potentially 25,000.
• Bearish Case: Weak US data or hawkish central bank signals may push the DAX toward 24,000, bringing the 50-day Exponential Moving Average (EMA) into play.

At the time of writing on July 28, the DAX futures jumped 229 points, while the Nasdaq 100 was up 127 points. Markets reacted to the news of the US-EU trade deal.

DAX Technicals

Despite Friday’s loss, the DAX remains above its 50-day and 200-day Exponential Moving Averages (EMA), indicating a bullish bias.

• Upside Target: A breakout above 24,500 could pave the way to the July 10 record high of 24,639. A sustained move above 24,639 may bring the 25,000 level into sight.
• Downside risk: A break below 24,000 could enable the bears to target the 50-day EMA.

The 14-day Relative Strength Index (RSI), at 54.06, suggests the DAX could climb to 24,639 before entering overbought territory (RSI > 70).

DAX Outlook Summary: US-EU Trade Talks and Central Bank Guidance

Traders should consider reactions to the EU-US trade agreement and central bank commentary, with trade headlines expected to dominate.

Explore our exclusive forecasts to assess whether improving trade sentiment could lift the DAX to new highs. Refer to our latest forecasts and macro insights here for further analysis, and consult our economic calendar.