DAX Index: The Euro Area Economy, the ECB, US Data, and Earnings

Highlights

• The DAX declined by 0.12% on Monday, ending the session at 16,942.
• On Tuesday, Q4 GDP numbers for Germany and the Eurozone warrant investor attention.
• Later in the session, the US economic and earnings calendars need consideration.

Overview of the DAX Performance on Monday

The DAX declined by 0.12% on Monday. Partially reversing a 0.32% gain from Friday, the DAX ended the session at 16,942. Significantly, the DAX ended a three-day winning streak.

ECB Vice President Luis de Guindos Talked Monetary Policy

ECB Vice President Luis de Guindos discussed progress toward taming inflation on Monday. The ECB Vice President reportedly said,

“There has been good news regarding the evolution of inflation, and that – sooner or later – will end up being reflected in the monetary policy. We are going to be dependent on the data, we don’t have any kind of calendar, it will depend on the evolution of inflation, and I am optimistic regarding the evolution of inflation.”

There were no economic indicators for Germany or the Eurozone for investors to consider.

US Economic Calendar: Dallas Fed Manufacturing Index

On Monday, Dallas Fed Manufacturing Index numbers for December failed to spook investors. The Dallas Fed Manufacturing Index slid from -10.4 to -27.4 in January.

However, investors brushed aside the disappointing numbers. The manufacturing sector contributes less than 30% to the US economy. Recent US economic indicators, including Q4 GDP numbers, continue supporting a soft landing.

The US equity markets and US Treasury yields supported a late DAX recovery to reduce the deficit for the session. On Monday, the Nasdaq Composite Index rallied 1.12%. The Dow and the S&P 500 saw gains of 0.59% and 0.76%, respectively. 10-year US Treasury yields fell by 1.57%.

Tech stocks dictated the market trends before mega-cap tech earnings results and the Fed interest rate decision.

The Monday Market Movers

Bayer tumbled by 4.86% as investors responded to news a US court ordered the firm to pay $2.25 billion to a man in Pennsylvania. Reportedly, the man developed cancer from contact with the Roundup weedkiller.

Bank stocks also ended the day with losses as investors reacted to BNP Paribas downgrading Schroders, a UK fund manager. Commerzbank and Deutsche Bank ended the session down 1.31% and 0.86%, respectively.

Auto stocks had a mixed start to the week. Mercedes Benz Group gained 1.01%, with Volkswagen rising by 0.54%. BMW ended the session up 0.15%, while Porsche declined by 0.48%.

However, Zalando SE and Adidas continued to benefit from luxury goods earnings results from Friday, gaining 3.45% and 0.08%, respectively.

Euro Area GDP Numbers and ECB Chief Economist Philip Lane in Focus

On Tuesday, Q4 GDP numbers for Germany and the Eurozone warrant investor attention. Economists forecast the German economy to contract by 0.3% in Q4 after stalling in the previous quarter. The markets expect a German recession in Q1. However, a more marked-than-expected contraction could pressure the DAX.

Eurozone GDP numbers will also move the dial, with economists expecting the German economy to impact the broader Euro area. Economists predict the Eurozone economy to contract by 0.1% after shrinking by 0.1% in Q3.

Beyond the numbers, ECB Chief Economist Philip Lane is on the calendar to speak. Investors must consider comments about the economic outlook, inflation, and interest rates.

US Economic Calendar: Consumer Confidence and Job Openings

On Tuesday, US consumer confidence and labor market data will garner investor interest. Economists forecast the CB Consumer Confidence Index to increase from 110.7 to 115.0 in January. A pickup in consumer confidence could signal a positive outlook for consumer spending and the US economy.

Economists expect JOLTs Job Openings to fall from 8.79 million to 8.75 million in December. A relatively modest fall in job openings could reflect a resilient US labor market.

Beyond the economic calendar, US corporate earnings also need consideration. Alphabet Inc. (GOOGL), Microsoft Corp. (MSFT), and General Motors (GM) are among the big names to release earnings results.

Short-term Forecast

Near-term trends for the DAX will likely hinge on euro area GDP and inflation numbers, central bank forward guidance, and corporate earnings. Sticky euro area inflation numbers and more hawkish-than-expected central bank comments could overshadow better-than-expected earnings.

In the futures, the DAX and the Nasdaq mini were up 9 and 59 points, respectively.

DAX Technical Indicators

Daily Chart

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

A DAX breakout from the Friday high of 16,968 would bring the all-time high (ATH) of 17,003 into play.

On Tuesday, China, Euro area GDP numbers, the ECB, the US economic calendar, and corporate earnings warrant investor attention.

However, a drop below the 16,850 handle would support a fall toward the 16,750 handle.

The 14-day RSI at 63.83 suggests a DAX move to the ATH of 17,003 before entering overbought territory.

4-Hourly Chart

The DAX held above the 50-day and 200-day EMAs, confirming the bullish price trends.

A DAX break above the Friday high of 16,968 would give the bulls a run at the ATH 17,003.

However, a fall through the 16,850 handle would bring the 50-day EMA into play.

The 14-period 4-hour RSI at 64.26 indicates a DAX move to the ATH before entering overbought territory.