DAX Slides Amid Shifting US Tariff Developments and China’s Trade Data
Market volatility deepened as shifting US trade policies and weak Chinese trade data sent ripples through European equities. The DAX took a hit, reversing gains as investors weigh the risks of a US-EU trade war and its impact on German industries.
On Friday, March 7, the DAX slid by 1.75%, reversing Thursday’s 1.47% rally to close at 23,009. Despite the pullback, the DAX ended the week up 2.03%.
Sector Highlights: Auto Stocks Hit the Reverse on Trade Uncertainties
BMW led auto stocks lower, sliding 3.86%, while Daimler Truck Holding and Mercedes-Benz Group fell 2.75% and 2.57%, respectively. Volkswagen and Porsche also posted losses.
Tech stocks Infineon Technologies and SAP also faced selling pressure, falling 2.20% and 2.68%, respectively.
German Factory Orders Slump
German factory orders plunged 7% month-on-month in January, reversing December’s 5.9% gain. The sharp decline underscored the potential impact of US tariffs on EU goods demand and aligned the ECB staff’s lower 2025 growth forecast.
German Trade Data in Focus Amid Tariff Jitters
Germany’s trade data will draw interest early in the March 10 session. Economists expect Germany’s trade surplus to widen from €20.7 billion in December to €21.0 billion in January. A wider-than-expected trade surplus could signal an improving demand environment, benefiting German exporters.
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See all DAX forecastsHowever, Germany’s trade terms with the US could be crucial. A widening in Germany’s trade surplus with the US could raise threats of tariffs on EU goods. In 2024, Germany’s trade surplus with the US rose to a record €70 billion.
Other stats include Germany’s industrial production numbers. However, these will likely play second fiddle to the trade data.
Fed Chair Powell and the US Jobs Report Deliver Late Support
On March 7, the US Jobs Report signaled a cooling labor market, bolstering hopes for a Fed rate cut, lifting risk assets.
- Nonfarm payrolls fell short of an expected 170k increase, rising 151k in February.
- Average hourly earnings increased 0.3% month-on-month in February, down from 0.4% in January.
- Unemployment rose in February to 4.1%, up from 4.0% in January.
Last week’s US data supported expectations of a June Fed rate cut. According to the CME Fed WatchTool, the chances of a June rate cut rose from 80.8% to 81.7%.
Fed Chair Jerome Powell further boosted sentiment, stating on March 7 that the US economy remained strong.
US Markets Advance Following Powell’s Reassurances and Labor Market Data
The Nasdaq Composite Index advanced by 0.70%, while the Dow and the S&P 500 gained 0.52% and 0.55%, respectively.
However, lingering concerns over trade policy uncertainty limited the gains.
Near-Term Outlook
The DAX’s near-term trends hinge on several key drivers:
- German fiscal policy: Progress on fiscal rule changes and an infrastructure fund.
- Trade tensions – Escalating US-EU and US-China trade disputes pose downside risks.
- US CPI Report – Inflation trends will influence the Fed rate path and DAX price trends.
If fiscal stimulus, easing trade tensions, and dovish central bank policies align, the DAX could approach 24,000. However, policy roadblocks, escalating trade risks, or if the Fed maintains a hawkish stance, the index may drop back toward 22,750.
As of Monday morning, the DAX futures were up 134 points, while the Nasdaq 100 mini dropped 93 points, signaling a volatile session ahead.
DAX Technical Indicators
Daily Chart:
Despite Friday’s losses, the DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs). However, tariff-fueled volatility suggests potential short-term downside risks within the broader uptrend.
A break above Thursday’s record high of 23,476 could enable the bulls to target 23,750. A breakout from 23,750 may signal a move toward 24,000.
Conversely, if the DAX breaks below 23,000, the bears could test last week’s 22,750 support level.
With the RSI at 59.19, the DAX remains below overbought levels (above 70), suggesting room for a move toward the 23,476 all-time high.
Conclusion: Key Drivers to Watch
Market participants should closely monitor:
- Developments in German fiscal policy.
- Trade data from Germany, especially trade terms with the US.
- ECB and Fed commentary.
- US-EU and US-China trade tensions.
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