Dax Index News: Futures Signal Bullish Forecast as US-EU Trade Talks Progress

DAX Slides as US President Trump’s Tariff Deadline Fast Approaches

Market jitters about the US and the EU reaching a trade agreement by the July 9 deadline impacted sentiment. On Tuesday, July 1, the DAX dropped 0.99%, following Monday’s 0.51% loss and closing at 23,910.

Concerns about US tariffs affecting trade terms and the global economy pressured demand for DAX-listed stocks. The US and the EU are in trade negotiations, with US negotiators reportedly pressuring the EU to accept a sweeping 10% tariff. The EU is pushing for exemptions for key sectors, including alcohol, commercial aircraft, pharma, and semiconductors, as part of the deal.

10% tariffs and a stronger EUR/USD could impact demand for German goods. The EUR/USD pair has soared 9% to $1.17986 since April 2 (Liberation Day). On July 1, China’s Caixin Manufacturing PMI survey underscored the effect of tariffs on external demand. New export orders fell for the third consecutive month in June.

A pickup in Euro area inflation added to the negative mood. The Eurozone’s annual inflation rate rose from 1.9% in May to 2% in June, while the core inflation rate of 2.3% remained above the ECB’s 2% target. Rising inflationary pressures could delay ECB rate cuts, impacting rate-sensitive stocks.

Sector Performance: Auto, Defense, and Tech Stocks Stumble

Concerns about US tariffs weakening demand weighed on Germany’s export-focused sectors.

Germany’s defense stocks led the losses. Rheinmetall and MTU Aero slid 5.26% and 4.19%, respectively. Airbus dropped 2.72%, while Infineon Technologies fell 1.74%.

Automaker stocks also struggled. Daimler Truck Holding declined 2.09%, with Mercedes-Benz Group, Volkswagen, and BMW ending the session with losses.

Meanwhile, Adidas jumped 4.17% on upbeat earnings expectations.

Eurozone Unemployment in Focus

On Wednesday, July 2, unemployment figures for the Eurozone will draw interest. Economists expect the unemployment rate to remain unchanged at 6.2% in May.

Steady or lower unemployment may enable the ECB to delay rate cuts to assess the effects of tariffs on inflation and the economy. A less dovish ECB stance could weigh further on risk appetite for DAX stocks. Conversely, rising unemployment may revive ECB rate cut bets, supporting risk assets.

While the numbers will influence sentiment, trade developments remain the key driver.

Wall Street Mixed: Fed Chair Powell Fuels Policy Uncertainty

US markets were mixed on July 1 as investors considered Fed Chair Powell’s latest comments. The Dow gained 0.91%, while the Nasdaq Composite Index and the S&P 500 posted losses of 0.82% and 0.11%, respectively.

Fed Chair Powell addressed market expectations of a Fed rate cut, stating:

“Not going to rule in or rule out any particular meeting. Officials will be monitoring, particularly, what does show up in terms of inflation or what does not show up.”

As the US Jobs Report looms, Powell commented on the labor market, stating:

“We watch very carefully for signs of unexpected weakness.”

Nick Timiraos, Chief Economics Correspondent for The Wall Street Journal, remarked:

“There’s still the June payroll & inflation report for June.”

Despite Powell’s comments, markets continued betting on a September Fed rate cut. According to the CME FedWatch Tool, the chances of a September Fed rate cut dipped from 91.4% on June 30 to 91.1 on July 1.

US ADP Non-Farm Employment Change Report to Spotlight the Fed

Later in the July 2 session, the ADP will release its monthly non-farm employment change report. Economists forecast a 95k rise in non-farm payrolls in June, up from 37k in May.

Stronger labor market data may temper Fed rate cut expectations, pressuring risk assets such as the DAX. Conversely, a lower reading may raise expectations of a July move, lifting sentiment.

Beyond the numbers, investors should monitor Fed speakers for reactions to labor market data and views on monetary policy.

Outlook: Key Catalysts for the DAX

The DAX’s near-term outlook depends on US labor market data, US-EU trade developments, and central bank guidance.

• Bullish Case: A US-EU trade deal, softer US labor market data, and dovish central bank rhetoric could send the DAX toward 24,000.
• Bearish Case: Stalled US-EU trade talks, stronger US economic data, or hawkish central bank cues may push the DAX toward the 50-day EMA. A drop below the 50-day EMA could expose the 23,000 support level.

At the time of writing on July 2, the DAX futures jumped 136 points, while the Nasdaq 100 was up 78 points. Futures markets signaled a positive start to the mid-week session.

Technical Setup Suggests Cautious Optimism

Despite Tuesday’s loss, the DAX remains above the 50-day and 200-day Exponential Moving Averages (EMA), indicating bullish momentum.

• Upside Target: A breakout above 23,750 could pave the way to the June 27 high of 24,041. Sustained buying may bring the June 5 high of 24,479 into sight.
• Downside risk: A drop below 23,500 could enable the bears to target the 50-day EMA and potentially the crucial 23,000 support level.

The 14-day Relative Strength Index (RSI), at 50.60, suggests the DAX could climb to 24,479 before entering overbought territory (RSI > 70).

Labor Market Data, Trade Developments, and Central Bank Signals

Traders should closely track US-EU trade headlines, key labor market data, and central bank commentary. However, renewed US-EU trade tensions could weigh on sentiment, overshadowing economic data and central bank signals.

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.