Dax Index News: Forecast Hinges on US CPI Data, German ZEW Sentiment Today

DAX Eyes 24,500 as the US and China Dodge a Full-Blown Trade War

The US and China extended the trade war truce by 90 days, boosting demand for risk assets. The DAX rose 0.21% to 24,133 in early trading on Tuesday, August 12, reversing the previous session’s 0.34% loss. Notably, the Index could snap a two-day losing streak.

The 90-day extension eases concerns about a 145% US tariff on Chinese goods and a 125% levy on US goods, equivalent to trade embargos. Such a scenario could have seen China flood the EU and other regions with cheap goods, impacting demand for German products.

Banks and Autos Climb Ahead of Key Data

Auto-related stocks were among the front-runners in early trading on August 12. Continental AG rallied 1.57%. BMW, Mercedes-Benz Group, Porsche, and Volkswagen also posted gains.

Banking sector stocks continued to climb ahead of the highly anticipated US CPI Report. Commerzbank and Deutsche Bank advanced 0.77% and 0.32%, respectively.

However, Hannover Re slid 1.36% after releasing its earnings results, dragging insurance stocks into the red. Munich Re fell 0.25% in early trading. The firm reported higher than expected large loss expenditure, impacting the share price.

German Business Sentiment in Focus

On Tuesday, August 12, German economic sentiment will draw interest. Economists forecast the ZEW Economic Sentiment Index to fall from 52.7 in July to 40 in August. A sharp drop in sentiment could signal a weakening demand environment, weighing on risk appetite. On the other hand, a higher reading may boost demand for German-listed stocks.

Beyond the data, trade headlines, Russia-Ukraine war developments, and corporate earnings will dictate DAX trends ahead of the US session.

Wall Street Retreats as US Inflation Data Looms

US markets posted losses on Monday, August 11, as the market focus shifted from corporate earnings to the upcoming US CPI Report. The Dow declined 0.45%, while the Nasdaq Composite Index and the S&P 500 fell 0.30% and 0.25%, respectively.

Investors have priced in a September Fed rate cut. However, hotter inflation may weigh on hopes for a September cut, affecting demand for risk assets. Earlier uncertainty about whether the US and China would extend the 90-day trade war truce also weighed on risk appetite.

Markets Brace for Crucial US CPI Report and Fed Signals

Later in the Tuesday session, the US CPI Report will spotlight the Fed. Economists expect the annual inflation rate to rise from 2.7% in June to 2.8% in July, while forecasting a core inflation rate of 3% (June: 2.9%).

Hotter-than-expected inflation could reduce the likelihood of further Fed rate cuts over the remainder of 2025. Higher borrowing costs may weaken company earnings and share prices. Conversely, softer inflation readings may cement a September Fed rate cut and fuel speculation about further easing in Q4. A more dovish Fed stance could boost demand for risk assets such as the DAX.

According to the CME FedWatch Tool, the chances of a September rate cut to 4.25% stood at 84.4% on August 11, with the probability of an October Fed rate cut to 4% at 54.1%.

Beyond the data, investors should track FOMC members’ reactions to the US CPI report.

Near-Term Outlook

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

• Bearish Scenario: Hotter US inflation or hawkish central bank signals could challenge the DAX’s recovery. The DAX may drop below 24,000, exposing the 50-day Exponential Moving Average (EMA).
• Bullish Scenario: Cooling US inflation or dovish policy rhetoric could boost buying momentum, lifting the DAX toward the record high of 24,639.

DAX Technical Indicators

Daily Chart

After recovering from the August 1 low of 23,381, the DAX trades above the 50-day and the 200-day Exponential Moving Averages (EMA). The EMAs signal bullish momentum.

A breakout above 24,150 could allow the bulls to target the 24,500 level. A sustained move through 24,500 may pave the way to the record high of 24,639.

On the downside, a break below the 24,000 level may expose the 50-day EMA.

Final Thoughts

Overall, the DAX’s recovery hinges on several key factors. Trade news, key economic data, and central bank policy commentary will likely dictate the index’s next moves.

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