DAX Index Today: German Ifo Business Climate in Focus, ECB Insights Awaited

The Overview of the DAX Performance

The DAX gained 0.01% on Friday (May 24). Following a 0.06% rise on Thursday (May 23), the DAX ended the session at 18,693.

German Economy Expanded in Q1 2024

On Friday, Q1 2024 GDP numbers for Germany drew investor interest, expanding by 0.2%. In Q4 2023, the German economy contracted by 0.5%. The numbers followed better-than-expected private PMI numbers that signaled an improving macroeconomic environment.

The ECB could delay post-June interest rate cuts in response to the more upbeat economic outlook.

Michigan Consumer Sentiment and Inflation Expectations

US economic indicators provided late support. According to the finalized University of Michigan Survey of Consumers, the Michigan Consumer Sentiment Index fell from 77.2 to 69.1 (prelim: 67.5). Inflation Expectations increased from 3.2% to 3.3%, down from a preliminary 3.5%.

The downward revision to inflation expectations drove buyer demand for riskier assets. On Friday, the Dow advanced by 0.01%. The Nasdaq Composite Index and S&P 500 saw gains of 1.10% and 0.70%, respectively.

The Friday Market Movers

Siemens Energy AG topped the DAX, surging by 4.27%. Speculation of Siemens AG passing its remaining 17.1% holding in Siemens Energy AG to a group pension likely influenced price movements.

Auto stocks found much-needed support. Porsche rallied 1.04%, with Mercedes Benz Group gaining 0.49%. BMW and Volkswagen advanced by 0.13% and 0.38%, respectively. News of UBS upgrading French car manufacturer Renault to neutral contributed to the gains.

Bank stocks also ended the session in positive territory. Commerzbank and Deutsche Bank rose by 0.61% and 1.14%, respectively.

However, investor concerns about the ECB delaying post-June rate cuts impacted tech stocks. Infineon Technologies and SAP saw losses of 0.16% and 0.72%, respectively.

German Ifo Business Climate and the ECB

On Monday (May 27), the German Ifo Business Climate Index will warrant investor attention. A sharp pickup in business confidence would align with the PMI numbers for May. Upbeat numbers could give the ECB more reason to delay a post-June interest rate cut.

Economists forecast the Ifo Business Climate Index to increase from 89.4 to 91.5 in May. Furthermore, economists expect contributions from the Ifo Expectations and Current Conditions sub-components.

Beyond the numbers, investors should consider ECB commentary. ECB Chief Economist Philip Lane is on the calendar to speak. Views on inflation, the economic outlook, and post-June interest rate hikes could move the dial.

There are no economic indicators from the US, with the US markets closed for Memorial Day. Nevertheless, investors should monitor FOMC member chatter. Recent US economic data, including the S&P Global Services PMI, reduced bets on a September Fed rate cut. Hawkish chatter could impact buyer demand for rate-sensitive DAX-listed stocks.

Near-Term Outlook

Near-term trends for the DAX will hinge on inflation numbers from the euro area and the US. Hotter-than-expected numbers could impact investor expectations of interest rate cuts. Nevertheless, central bank commentary also needs consideration. ECB plans to hit pause after a June interest rate cut, and hawkish Fed chatter would be DAX negative.

On the Futures markets, the DAX was down 27 points.

DAX Technical Indicators

Daily Chart

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

A DAX return to the 18,750 handle could give the bulls a run at 19,000. A break above 19,000 would bring 20,000 into play.

German business confidence numbers and ECB chatter need consideration.

However, a DAX drop below the 18,600 handle could give the bears a run at the 18,500 handle.

The 14-day RSI at 60.84 indicates a return to the May 15 all-time high before entering overbought territory.

4-Hourly Chart

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

A DAX breakout from the 18,750 handle would bring the all-time high (18,893) into view.

Conversely, a DAX break below the 50-day EMA could signal a fall through the 18,500 handle.

The 14-period 4-hour RSI at 52.41 indicates a DAX move to the May 15 all-time high before entering overbought territory.