DAX Steadies on Trade Deal Optimism
Optimism over a US-EU trade deal boosted demand for DAX-listed stocks, with fears of a 30% US tariff on EU goods fading. The DAX gained 0.23% on Thursday, July 24, following Wednesday’s 0.83% rise, closing at 24,296.
Reports of the US and EU nearing a trade deal, including a 15% US tariff on EU goods, lifted sentiment as the August 1 deadline loomed. Though a 15% tariff is still on the table, it is considered by markets a more favorable outcome than the earlier 30% threat.
However, the ECB’s forward guidance on monetary policy limited the gains. ECB President Christine Lagarde stated that policymakers were more focused on trade developments and the potential impact of tariffs on the economy before deciding on further rate cuts.
The ECB President signaled a wait-and-see approach despite inflation dropping to the central bank’s 2% target. Eurozone private sector PMIs reflected economic resilience, enabling the ECB to take a more cautious stance on monetary policy.
Sector Snapshot: Banks Shine on Earnings
Deutsche Bank soared 9.13% after beating earnings estimates. Commerzbank gained 2.41%. Meanwhile, Deutsche Telekom rallied 5.05% after T-Mobile, its US subsidiary, released strong Q2 earnings.
Hopes of a drop in US tariffs on exports boosted demand for auto stocks. Porsche and Volkswagen rose 0.50% and 0.48%, respectively, with Mercedes-Benz Group also advancing. These sector gains came despite Tesla (TSLA) plunging 8.2% on a sharp fall in revenue and net income.
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See all DAX forecastsBusiness Sentiment and Trade Talks in Focus
On Friday, July 25, German business sentiment figures will require consideration. Economists forecast the Ifo Business Climate Index to rise from 88.4 in June to 89 in July. A higher-than-expected reading would align with July’s private sector PMI survey, which signaled improving growth expectations.
A pickup in sentiment could boost demand for DAX-listed stocks. However, progress toward a US-EU trade deal may limit the impact of weaker numbers on risk assets.
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, remarked on the PMI numbers, stating:
“Overall, we see increasing signs of a recovery in the manufacturing sector, a picture that is confirmed by the latest investment initiative by key business leaders and supported by the measures taken by the federal government, including more favourable depreciation conditions for investments since July 1. Even higher US tariffs should not fundamentally change this outlook.”
While July’s numbers will influence sentiment, trade developments remain crucial for market trends.
Wall Street Mixed as Earnings and Trade Talks Drive Sentiment
US markets had mixed performances on Thursday, July 24. Corporate earnings results lifted the broader tech sector, though they weighed on the Dow. The Nasdaq Composite Index and the S&P 500 rose 0.18% and 0.07%, respectively, while the Dow dropped 0.70%.
Alphabet (GOOGL) climbed 1.02% after beating earnings estimates, lifting appetite for AI-related stocks. Advanced Micro Devices (AMD) jumped 2.19%. However, Tesla (TSLA) capped the Nasdaq’s gains, tumbling 8.2% after reporting a sharp fall in revenue and net income.
IBM plunged 7.62% on Thursday, after missing software revenue estimates, weighing on the Dow.
US Durable Goods Orders and Trade Talks in Focus
Later in the session on Friday, durable goods orders will provide insights into demand. Economists forecast durable goods orders, excluding transportation, to rise 0.1% month-on-month in June after May’s 0.5% increase. A higher reading would signal robust demand, lifting risk sentiment. However, a sharp fall could pressure risk assets.
While the economic data will influence risk appetite, investor focus will likely remain on US-EU trade talks. A trade deal, with a 15% US tariff on EU goods, could fuel sentiment, lifting DAX-listed stocks. Conversely, stalled talks may weigh on the DAX.
Outlook: Key Catalysts for the DAX
The DAX’s near-term outlook hinges on US-EU trade talks and central bank policy guidance.
- Bullish Case: A US-EU trade deal and dovish central bank commentary. These factors could push the DAX toward its record high of 24,639.
- Bearish Case: Stalled US-EU trade talks or hawkish central bank cues may drag the DAX toward 24,000, potentially exposing the 50-day EMA.
At the time of writing on July 25, the DAX futures dropped 49 points, while the Nasdaq 100 was up 25 points. Futures markets signaled a mixed start for Friday’s session as investors monitor trade headlines. The Asian markets also trended lower on Friday, with the Hang Seng Index down 0.86%, underscoring investor caution toward trade talks.
DAX Technicals
After recovering from Tuesday’s sell-off (-1.09%), the DAX trades comfortably above its 50-day and 200-day Exponential Moving Averages (EMA), indicating bullish momentum.
- Upside Target: A breakout above the July 24 high of 24,515 could bring the July 10 record high of 24,639 into play. A sustained move above 24,639 may enable the bulls to target the 24,750 level.
- Downside risk: A drop below 24,000 could expose the 50-day EMA.
The 14-day Relative Strength Index (RSI), at 56.03, indicates the DAX could climb to 24,639 before entering overbought territory (RSI > 70).
DAX Outlook Summary: US-EU Trade Talks and Central Bank Commentary
Traders should closely monitor EU-US trade developments and central bank chatter, with trade developments likely to carry more weight.
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.
