ECB's balance of restrictive rates and lack of economic growth spurs DAX 30's resilience amidst international monetary tightening messages.
The DAX gained 0.81% on Thursday, ending the session at 15,353.
Corporate earnings continued on Thursday to offset the prevailing sentiment towards the German economy.
On Friday, ECB commentary, corporate earnings, and US consumer sentiment will be focal points.
Thursday DAX Overview
The DAX gained 0.81% on Thursday. Following a 0.51% rise on Wednesday, the DAX ended the day at 15,353.
ECB Economic Bulletin Highlights ECB Commitment
On Thursday, the ECB Economic Bulletin garnered investor interest. The Economic Bulletin highlighted an ECB committed to bringing inflation to target with a higher-for-longer interest rate path. However, the ECB also considered the current interest rate level sufficient to bring inflation to target.
According to the Economic Bulletin, the ECB will keep rates in restrictive territory and remain data-dependent.
The market bets on the ECB reaching the end of its monetary tightening cycle supported the appetite for riskier assets.
Fed Chair Powell to Inflict Friday Losses
On Thursday, Fed Chair Powell discussed monetary policy after the European closing bell. The Fed Chair surprised the markets with a hawkish outlook on interest rates, sending 10-year US Treasury yields to a session high of 4.645%. 10-year US Treasury yields increased by 2.96%, ending the Thursday session at $4.628%.
The hawkish Fed Chair speech and the spike in Treasury yields left the US equity markets in negative territory.
On Thursday, the Dow fell by 0.65%, with the Nasdaq Composite Index and S&P 500 seeing losses of 0.94% and 0.81%, respectively.
The Thursday Market Movers
Siemens Energy AG surged 6.30% on news of securing government backing for project guarantees.
Merck rallied 3.92% despite forecasting full-year profit to decline to the lower half of the target range on Thursday. Deutsche Telekom AG gained 0.87% on strong third-quarter results and a positive outlook.
However, Rheinmetall AG fell by 0.91% despite positive guidance for the 2023 fiscal year. Airbus Group also suffered, sliding 1.96% despite reporting higher aircraft deliveries.
ECB President Lagarde and Corporate Earnings in Focus
On Friday, ECB President Christine Lagarde will be in the spotlight. After the ECB Economic Bulletin, investors will likely expect monetary policy comments to affirm the higher-for-longer projection.
However, comments on the euro area economy and inflation could influence investor sentiment. The ECB President will have a fireside chat with Martin Wolf at the Financial Times Global Boardroom.
Away from the economic calendar, corporate earnings will remain a focal point. Allianz is among the big names to release earnings on Friday.
US Consumer Sentiment and Fed Speeches in Focus
On Thursday, Michigan Consumer Sentiment figures for November will warrant investor attention. A pickup in consumer sentiment would support a more hawkish Fed interest rate path.
Economists forecast the Consumer Sentiment Index to slip from 63.8 to 63.7. Beyond the headline figure, the Michigan Consumer Expectations Index and Consumer Inflation Expectation sub-components also need consideration.
However, FOMC member commentary could also affect market risk sentiment. FOMC voting member Lorie Logan and non-voting member Raphael Bostic are on the calendar to speak today. Hawkish comments would align with Fed Chair Powell and impact US Treasuries and riskier assets.
The futures markets point to a negative start to the Friday session. The DAX and the Nasdaq mini were down 101 and 9 points, respectively.
Investor sentiment toward Fed monetary policy remains a headwind for the DAX. Better-than-expected US economic indicators and hawkish Fed speeches would impact the appetite for DAX-listed stocks. A higher for longer ECB interest rate path amid a deteriorating euro area macroeconomic environment would be another headwind for the DAX.
DAX Technical Indicators
The DAX sat above the 50-day EMA while remaining below the 200-day EMA, sending bullish near-term but bearish longer-term price signals.
A DAX drop below the 50-day EMA and 15,247 support level would bring sub-15,000 into play.
Corporate earnings, ECB commentary, US consumer sentiment, and FOMC member speeches will dictate session trends.
However, a break above the 200-day EMA would give the bull a run at the 15,477 resistance level.
The 14-day RSI reading of 59.42 suggests a DAX move to the 15,477 resistance level before entering overbought territory.
DAX 101123 Daily Chart
The DAX remains above the 50-day EMA while holding below the 200-day EMA, sending bullish near-term but bearish longer-term price signals.
A DAX break below the 15,247 support level would bring the 50-day EMA and the 15,000 handle into play.
However, a move through the 200-day EMA would give the bulls a run at the 15,477 resistance level.
The 71.49 14-4 hour RSI shows the DAX in overbought territory. Selling pressure could intensify at the 200-day EMA without favorable market news.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.