DAX Slips Ahead of Key US Inflation Data: Will US Inflation Trigger a Breakout?
On Tuesday, December 10, the DAX slipped by 0.08%, following Monday’s 0.19% loss, closing at 20,329. Significantly, the DAX failed to strike a new record high for the first time in seven sessions.
Weak trade data from China and investor caution ahead of Thursday’s ECB interest rate decision weighed on the DAX.
Auto Stocks Shine Despite Economic Concerns
Auto stocks extended their gains for the third consecutive session, with Volkswagen gaining 1.92%. Mercedes Benz Group advanced by 0.99%, while BMW and Porsche also posted gains. Market speculation about China’s fresh stimulus measures targeting consumption boosted demand for auto stocks.
Notably, investors brushed aside weaker-than-expected trade data that signaled deteriorating domestic demand.
However, Rheinmetall AG dropped 1.24% amid optimism about the Ukraine war possibly ending, which weighed on defense sector stocks.
China Trade Data Highlights Broader Challenges
On Tuesday, China’s trade data signaled weak domestic and overseas demand, testing buyer appetite for riskier assets. Exports dropped by 6.7% year-on-year in November, down from 12.7% in October. Meanwhile, imports fell at a sharper pace. Falling imports and exports could impact global trade terms and the German economy.
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See all DAX forecastsThe sharp decline in imports overshadowed news of Beijing’s planning fresh stimulus to boost consumption and domestic demand.
German Inflation Clouds ECB Outlook
Germany’s finalized inflation figures for November challenged investor bets on multiple ECB rate cuts. The annual inflation rate rose from 2.0% in October to 2.2% in November.
Services sector inflation contributed to the uptick in headline inflation, while energy prices trended lower.
Germany’s economic woes will likely pose a challenge to ECB policymakers in Thursday’s interest rate decision. On the one hand, inflation has ticked higher, while on the other, Germany’s economic indicators send gloomier signals.
Expert Views on Germany’s Economy
Daniel Kral, European Macro Specialist at Oxford Economics, commented on Germany’s deteriorating economic status, saying,
“Germany’s goods exports as a share of GDP have been flat over the last decade in nominal and real terms. With external environment less favourable (🇨hina rise, 🇺🇸 protectionism, 🇪🇺 low growth), Germany needs to rebalance towards domestic demand-led growth (which will erode its surplus).”
US Markets Trend Lower: Investors Lock Profits
US equity markets extended their losses on Tuesday, December 10. The Nasdaq Composite Index and the S&P 500 posted losses of 0.25% and 0.30%, respectively, while the Dow dropped by 0.35%. The Dow extended its losing streak to four sessions.
Caution prevailed in the Tuesday session, with the looming US CPI Report likely to dictate the Fed’s rate path. A more hawkish Fed rate path may raise borrowing costs, potentially reducing company profits.
US Economic Calendar: US CPI Report Crucial
On Wednesday, December 11, the all-important US CPI Report will influence demand for DAX-listed stocks. Economists forecast the US annual inflation rate to rise from 2.6% in October to 2.7% in November while predicting core inflation to hold at 3.3%.
Hotter-than-expected inflation could lower bets on a December Fed rate cut, potentially dragging the DAX below 20,000. A more hawkish rate path may raise borrowing costs, which may lower company earnings and stock prices.
Near-Term Outlook
In the near term, DAX trends hinge on stimulus-related news from Beijing, central bank chatter, and the US CPI Report. Softer US inflation figures could drive the DAX to new record highs.
Conversely, a hotter-than-expected US CPI Report or hawkish central bank commentary may drag the index below 20,000.
However, downside risks remain. US tariffs on EU goods and intensifying competition from China could hurt German exports and economic recovery efforts.
As of Wednesday morning, futures signaled a mixed session ahead. DAX futures declined by 56 points, while the Nasdaq mini futures advanced by 24 points.
Details of Beijing’s stimulus plans, the US CPI Report, and central bank commentary will be crucial for riskier assets.
Investors should also track US tariff-related news for trading opportunities.
DAX Technical Indicators
Daily Chart
Despite this week’s decline, the DAX remains well above the 50-day and 200-day EMAs, affirming bullish price signals.
If the DAX breaks out from Monday’s record high of 20,462, it could enable the bulls to target 21,750 next. Furthermore, a break above 20,750 may bring the 21,000 level into play.
Stimulus news from Beijing, central bank commentary, US inflation, and US tariff-related news will influence DAX trends.
Conversely, a DAX break below 20,150 could signal a fall toward 20,000. A drop through 20,000 may enable the bears to target the 19,675 support level.
The DAX remains in overbought territory, with the 14-day RSI at 70.94 (> 70). Selling pressure may increase at Monday’s all-time high of 20,462.
Explore in-depth forecasts and actionable strategies here for navigating DAX volatility.
