DAX Index: The ECB and US Consumer Inflation Expectation Numbers in Focus

Highlights

• The DAX gained 0.78% on Friday, ending the session at 16,759.
• German inflation, the US Jobs Report, and US Consumer Sentiment delivered a positive session.
• On Monday, US consumer inflation expectations will be a focal point.

Overview of the DAX Performance on Friday

The DAX gained 0.78% on Friday. After a 0.16% loss on Thursday, the DAX ended the Friday session at 16,759. Significantly, the DAX struck a new ATH of 16,783.

German Inflation Softened in November

On Friday, German economic indicators offered early support. The finalized CPI Report from Germany affirmed the preliminary numbers. In November, the German annual inflation rate softened from 3.8% to 3.2%. Softer inflation numbers across the euro area would support a less hawkish ECB rate path and support consumption.

US Jobs Report Eased Fears of a Hard Landing

The US Jobs Report and US consumer sentiment offered late support. Recent labor market stats raised concerns about the US labor market. JOLTs job openings and the ADP Employment numbers fueled bets on a March Fed rate cut to prevent a hard landing.

However, a lower US unemployment rate and a jump in hiring comforted the markets. Notably, wage growth softened from 4.1% to 4.0% year-over-year. A larger-than-expected rise in the Michigan Consumer Sentiment Index was also positive for the DAX. Significantly, the Inflation Expectations Index held steady at 4.5%.

The US equity markets ended the Friday session in positive territory. The Nasdaq Composite Index gained 0.45%, with the Dow and the S&P 500 rising by 0.36% and 0.41%.

The Friday Market Movers

Consumer-linked stocks were among the front-runners. Zalando SE rallied 2.81%, with Adidas gaining 1.18%. The market bets on a less hawkish ECB rate path drove buyer demand. A less hawkish rate path could raise disposable income and fuel consumer spending.

Auto stocks also made gains. BMW gained 2.35%, with Volkswagen rising by 1.16%. Daimler Truck Holding and Mercedes Benz Group ended the session up 0.88% and 0.85%. Porsche increased by 0.55%. Lower borrowing costs are a boon for the auto sector.

ECB Speakers in Focus Before Thursday

On Monday, ECB commentary will garner investor interest. ECB Executive Board member Elizabeth McCaul is on the calendar to speak. Support for discussions on interest rate cuts would drive buyer demand for DAX-listed stocks.

Recent ECB commentary supported the rising bets on a less hawkish ECB interest rate trajectory. ECB hawk Isabel Schnabel spoke on Tuesday, December 5, suggesting further rate hikes were unlikely.

US Inflation in the Focus

Later in the Monday session, US inflation figures also need consideration. Consumer Inflation Expectations numbers for November could influence market risk sentiment before the US CPI Report (Tues). Economists forecast Consumer Inflation expectations to accelerate from 3.6% to 3.8%.

Hotter-than-expected numbers could reduce bets on a March Fed rate cut. Reducing bets on a Q1 2024 Fed rate cut could affect riskier assets.

The futures markets pointed to a mixed start to the Monday session. The DAX was up 18 points, while the Nasdaq mini was down 41 points.

Short-Term Forecast

Near-term trends for the DAX will hinge on the US CPI Report (Tues), the Fed economic projections and press conference (Wed), and the ECB press conference (Thurs). A pickup in inflationary pressure and a hawkish Fed could counter a dovish ECB.

DAX Technical Indicators

Daily Chart

The DAX held above the 50-day and 200-day EMAs, with the EMAs sending bullish price signals.

A DAX move through the Friday ATH of 16,783 would bring the 17,000 psychological resistance level into play.

ECB commentary and US inflation are focal points on Monday.

However, a drop below the 16,750 handle would support a fall toward the 16,470 support level.

The 14-day RSI reading of 83.73 shows the DAX in overbought territory. Selling pressure could intensify at the Friday ATH of 16,783.

4-Hourly Chart

The DAX remained above the 50-day and 200-day EMAs, with the EMAs affirming bullish price signals.

A DAX move through the Thursday ATH of 16,783 would give the bulls a run at 17,000.

However, a drop below the 16,750 handle would bring the 16,470 support level into play.

The 81.82 14-4 hour RSI shows the DAX in overbought territory. Selling pressure may intensify at the all-time high of 16,783.

For a look at the economic events, check out our economic calendar.