DAX Index Today: Services PMIs Crucial Amid Flight to Safety

Market Overview

On Friday, August 2, the DAX slid by 2.33%. Following a 2.30% loss from Thursday, August 1, the DAX ended the session at 17,661.

Friday: DAX Market Movers

• Commerzbank and Deutsche Bank tumbled 4.62% and 5.86%, respectively. More dovish central bank rate paths could impact net interest margins and earnings.
• SAP and Infineon Technologies saw losses of 2.77% and 5.05%, respectively.
• Auto stocks also ended the session with heavy losses. Daimler Truck Holding declined by 4.67%, while Volkswagen fell by 2.34%. Economic recessions would impact auto sales.

Euro Area Services Sector in Focus

On Monday, August 5, finalized German and Eurozone Services PMI numbers will draw investor interest. Downward revisions to the flash PMIs could stoke fears of an economic recession, as services account for about 75% of the Eurozone economy.

The Eurozone Flash HCOB Services PMI fell from 52.8 in June to 51.9 in July.

However, investors should consider the subcomponents of the PMIs, including prices. Downward trends in input and output prices could support investor bets on multiple 2024 ECB rate cuts. Expectations of a more dovish ECB rate path could drive buyer demand for DAX-listed stocks. However, recession signals may overshadow sentiment toward a more dovish ECB rate path.

Corporate Earnings and the Tech Sector

On Monday, August 5, Infineon Technologies will release its earnings results. Weaker-than-expected earnings could negatively impact the broader tech sector as investors target the safe havens.

US Economic Data: The US Jobs Report

On Friday, August 2, the US Jobs Report spooked investors. The US unemployment rate unexpectedly rose from 4.1% in June to 4.3% in July, raising recession fears.

Softer labor market conditions could signal multiple 2024 Fed rate cuts. However, higher unemployment could impact wages and disposable income, dampening consumer spending. Contributing over 60% to the US economy, a slump in private consumption may increase the risk of a recession.

Wage growth also slowed more than expected, adding to the gloomier economic outlook.

Other Stats

Other stats include factory orders, which tumbled 3.3% in June after falling by 0.5% in May.

US Market Trends

On Friday, August 2, the US equity markets extended their losses from Thursday, August 1. The Nasdaq Composite Index tumbled by 2.43%, while the Dow and the S&P 500 slid by 1.51% and 1.84%, respectively.

10-year US Treasury yields slumped by 184 basis points to 3.794% as recession fears drove buyer demand for safe havens.

Expert Views on the US Jobs Report

Arch Capital Global Chief Economist Parker Ross commented on the US Jobs Report, saying,

“The 1-month private sector job diffusion index, which measures the share of industries recording an expansion of payrolls during the most recent month, dipped below 50 for the first time since the pandemic in July to 49.6 […]. Typically, the 1-month index has been at 42.7 at the onset of recessions vs 50.7 for the 6-month, so there’s still some time but we’re approaching concerning levels quickly.”

US ISM Services PMI

On Monday, August 5, the US services sector could influence the Fed rate path and market risk sentiment.

Economists forecast the crucial ISM Services PMI to increase from 48.8 in June to 51.0 in July. Accounting for almost 80% of the US economy, a pickup in service sector activity could ease fears of a US hard landing.

However, investors must also consider the subcomponents, including employment and price. Weaker labor market conditions and lower prices would support investor bets on multiple 2024 Fed rate cuts. The services sector remains the main source of demand-driven inflation.

A higher ISM Services PMI and softer price trends could support demand for DAX-listed stocks and a DAX move toward 18,000.

Near-Term Outlook

Near-term DAX trends depend on corporate earnings and the ISM Services PMI. Weaker US service sector activity and earnings misses could push the DAX 17,500.

In the futures markets, the DAX and the Nasdaq mini were down by 144 and 576 points, respectively. The Asian market session, with the Nikkei Index tumbling 8.06%, will likely set the tone for the session.

Investors should remain vigilant with corporate earnings and service sector data in focus. Monitor the news wires, economic data, and expert commentary to manage trading strategies. Stay up-to-date with our latest news and analysis to manage risk.

DAX Technical Indicators

Daily Chart

The DAX remained below the 50-day EMA while hovering above the 200-day EMA, affirming the bearish near-term but bullish longer-term price signals.

A breakout from 17,750 would support a return to 18,000. A break above 18,000 could bring the 50-day EMA into view.

Corporate earnings and service sector PMIs require consideration.

Conversely, a DAX break below the 17,615 support level and the 200-day EMA could signal a fall toward the 17,003 support level.

The 14-day RSI at 34.37 indicates a DAX drop to the 17,615 support level before entering oversold territory.

4-Hourly Chart

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

A break above 17,750 would support a move toward 18,000. A return to 18,000 could give the bulls a run at the 200-day and 50-day EMAs.

However, a DAX break below the 17,615 support level could signal a fall toward the 17,003 support level.

The 14-period 4-hour RSI at 23.84 shows the DAX sitting in oversold territory. Buyer pressure could intensify at the 17,615 support level.