DAX Index Today: Investor Focus Turns to Eurozone Inflation, ECB Policy Outlook

Overview of the DAX Performance on Thursday

The DAX gained 0.44% on Thursday. Following a 0.25% rise on Wednesday, the DAX ended the session at 17,678. Significantly, the DAX reached an all-time high of 17,743. On Thursday, the DAX extended the winning streak to seven sessions.

German Retail Sales, Unemployment, and Inflation Support Bet on an H1 2024 ECB Rate Cut

On Thursday, German retail sales unexpectedly fell by 0.4% in January, sending recessionary signals. The pullback in consumer spending could dampen demand-driven inflation and allow the ECB to cut interest rates.

Unemployment numbers also raised red flags about the German economy. The unemployment rate rose to 5.9% in January (revised from 5.8%), with the unemployment rate holding steady at 5.9% in February.

However, softer-than-expected German inflation numbers drove demand for DAX-listed stocks. The annual inflation rate fell from 2.9% to 2.5% in February. Economists forecast an inflation rate of 2.6%.

US Personal Income and Outlays Report Raised Bets on an H1 2024 Fed Rate Cut

On Thursday, US Core PCE Price Index and personal income/spending numbers for January warranted investor attention.

The US Core PCE Price Index increased by 2.8% year-on-year in January after rising by 2.9% in December. Alongside the softer inflation numbers, personal spending increased by 0.2% month-on-month after rising by 0.7% in December. Personal spending increased modestly while personal income jumped by 1.0%.

Softer inflation and a pullback in personal spending supported bets on an H1 2024 Fed rate cut.

On Thursday, the Nasdaq Composite Index gained 0.90%. The Dow and the S&P 500 ended the day up 0.12% and 0.52%, respectively.

The Thursday Market Movers

Allianz SE and Siemens Energy AG led the way, rallying 2.13% and 1.97%, respectively, with Siemens AG up 1.71%.

MTU Aero gained 1.55% on better-than-expected earnings.

However, auto stocks had a mixed session. Mercedes-Benz Group and BMW ended the day up 0.33% and 0.05%, respectively. Volkswagen and Porsche declined by 0.43% and 0.16%, respectively.

German Manufacturing, Eurozone Inflation, and the ECB

On Friday, the German Manufacturing PMI will draw investor interest. According to the preliminary survey, the Manufacturing PMI fell from 45.5 to 42.3 in February. A downward revision would raise fears of a prolonged German recession.

However, inflation numbers for the Eurozone could have more impact. Softer-than-expected inflation figures could fuel bets on an April ECB rate cut. Economists forecast the annual inflation rate to decline from 2.8% to 2.5% and core inflation to fall from 3.3% to 2.9% in February.

With inflation in focus, investors must also consider ECB chatter. Reaction to the inflation numbers and views on interest rate cuts would move the dial.

US Economic Calendar: ISM Manufacturing, Consumer Sentiment, and the Fed

On Friday, the ISM Manufacturing PMI and finalized Michigan Consumer Sentiment numbers need consideration. While the PMI figures need consideration, the consumer sentiment numbers will likely have more impact.

Upward revisions to the Consumer Sentiment Index and inflation expectation sub-components could impact investor bets on an H1 2024 Fed rate cut.

According to the preliminary survey, the Michigan Consumer Sentiment Index increased from 79.0 to 79.6 in February.

Beyond the numbers, investors must also monitor FOMC member speeches. Reactions to the inflation numbers and guidance on interest rate cuts would move the dial. FOMC member Christopher Waller is on the calendar to speak late in the European session.

Short-term Forecast

Near-term trends for the DAX will hinge on Eurozone inflation and US consumer sentiment numbers. However, service sector data could prove pivotal next week. A more marked pickup in service sector activity could temper bets on H1 2024 ECB and Fed rate cuts.

On Friday, the DAX futures and the Nasdaq mini were up 64 and 44 points, respectively. Upbeat economic indicators from China could deliver a positive start to the session.

DAX Technical Indicators

Daily Chart

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

A DAX break above the Thursday all-time high of 17,743 would support a move toward the 18,000 handle.

Eurozone inflation, US consumer sentiment, and central bank speeches need investor consideration.

A break below the 17,650 handle would give the bears a run at the 17,500 handle.

The 14-day RSI at 77.58 shows the DAX in overbought territory. Selling pressure could intensify at the ATH of 17,743.

4-Hourly Chart

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

A DAX move to the 17,743 all-time high would give the bulls a run at the 18,000 handle.

However, a DAX drop below the 17,650 handle could bring the 17,500 handle into play.

The 14-period 4-hour RSI at 81.90 shows the DAX sitting in overbought territory. Selling pressure could intensify at the all-time high of 17,743.