Dax Index News: Forecast Turns Bearish on Hot Inflation and Fed Rate Cut Doubts

DAX Slides as Earnings and Rate Cut Expectations Hit Risk Assets

Hot inflation data and earnings are shaking confidence—here’s how it’s hitting the DAX. The DAX slid 0.81% on Thursday, July 31, reversing Wednesday’s 0.19% gain to close at 24,066.

Auto and healthcare stocks tumbled as investors reacted to disappointing earnings reports. Hotter-than-expected German and US inflation indicators pared bets on ECB and Fed rate cuts, adding to the negative investor sentiment.

Germany’s annual inflation rate remained at 2% in July. Economists had expected inflation to cool to 1.9%. The inflation numbers coincided with better-than-expected labor market data, which may enable the ECB to delay rate cuts. Germany and the Eurozone’s unemployment rates remained unchanged at 6.3% (July) and 4.2% (June), respectively.

Sector Snapshot: Healthcare and Auto Stocks Slide

Siemens Healthineers tumbled 4.43% on July 31, while Fresenius Medical Care fell 1.11%. Sanofi reported weaker-than-expected earnings, impacting the healthcare sector.

Ferrari announced plans to reduce price compensation further to offset US tariffs, weighing on the German auto sector. Mercedes-Benz Group slid 2.51%, while Volkswagen dropped 1.58%. BMW and Porsche also posted losses.

Eurozone Inflation to Spotlight the ECB

On Friday, August 1, Eurozone inflation figures could influence the ECB rate path. Economists forecast the annual inflation rate to ease from 2% in June to 1.9% in July. A higher inflation reading may dampen ECB rate cut bets, pressuring German equities. Conversely, a lower print may revive hopes for further policy easing, boosting sentiment.

ECB commentary and corporate earnings will also influence the DAX’s near-term direction.

Wall Street Falls as US Inflation Indicators Sink Fed Rate Cut Bets

US markets posted losses on July 31 as investors reacted to a hotter-than-expected US Personal Income and Outlays Report. The Dow fell 0.74%, while the Nasdaq Composite Index and the S&P 500 declined 0.03% and 0.37%, respectively.

The US Core PCE Price Index rose 2.8% year-on-year in June, matching May’s increase. June’s numbers potentially reflected the effect of higher tariffs on inflation, supporting Fed Chair Powell’s wait-and-see policy stance.

According to the CME FedWatch Tool, the chances of a September Fed rate cut dropped from 47.6% on July 30 to 41.3% on July 31. A more hawkish Fed rate path could lift borrowing costs, affecting corporate earnings and share prices.

However, upbeat corporate earnings helped limit the Nasdaq and S&P 500’s losses. Meta Platforms (META) and Microsoft (MSFT) soared 11.25% and 3.95%, respectively, on earnings reports.

US Jobs Report in Focus

Later in the Friday session, the US Jobs Report will influence the Fed rate path. Economists expect nonfarm payrolls to increase 110k in July after rising 147k in June. Additionally, economists forecast an uptick in average hourly earnings but higher unemployment.

While economists forecast an uptick in average hourly earnings, softer wage growth and rising unemployment could revive Fed rate cut expectations. A more dovish Fed policy stance may lift sentiment. Conversely, better-than-expected labor market data may temper Fed rate cut bets, impacting risk assets such as the DAX.

Other stats include manufacturing sector PMI and consumer sentiment numbers. However, the US Jobs Report will likely have more weight on risk appetite.

Outlook: Key Catalysts for the DAX

The DAX’s near-term outlook hinges on Eurozone inflation data, the US Jobs Report, and central bank guidance.

• Bullish Case: Softer Eurozone inflation, weaker US labor market data, and dovish central bank cues. These factors could drive the DAX toward its record high of 24,639.
• Bearish Case: Higher Eurozone inflation, a strong US Jobs Report, or hawkish central bank rhetoric may drag the DAX toward the 50-day Exponential Moving Average (EMA).

At the time of writing on August 1, the DAX futures slid 140 points, while the Nasdaq 100 dropped 49 points. Fading bets on ECB and Fed rate cuts and weaker economic data from China weighed on sentiment. The S&P Global China General Manufacturing Index fell from 50.4 in June to 49.5 in July, dropping below the neutral 50 level. Export orders declined for a fourth month, reflecting the impact of tariffs on external demand.

DAX Technicals

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

• Upside Target: A breakout above the July 31 high of 24,433 could enable the bulls to target the 24,500 level. A sustained move through 24,500 may pave the way to the July 10 record high of 24,639.
• Downside risk: A drop below 24,000 could bring the 50-day EMA (23,849) into play. Increased selling pressure could expose the 23,500 support level.

The 14-day Relative Strength Index (RSI), at 49.88, indicates the DAX could drop to 23,500 before entering oversold territory (RSI< 30).

DAX Outlook Summary: Inflation, the US Jobs Report, and Central Bank Guidance

Traders should closely monitor key economic data, corporate earnings, and central bank guidance, with the US Jobs Report likely to dominate.

Explore our exclusive forecasts to assess today’s data could lift the DAX to new highs. Refer to our latest forecasts and macro insights here for further analysis, and consult our economic calendar.