DAX Index Today: The ECB Interest Rate Decision, the Press Conference, and 18,800

The Overview of the DAX Performance

On Wednesday (June 5), the DAX advanced by 0.93%. Partially reversing a 1.09% slide from Tuesday (June 4), the DAX ended the session at 18,576.

German Services PMI and Eurozone Producer Prices

On Wednesday, better-than-expected German Services PMI numbers influenced buyer appetite for DAX-listed stocks.

The HCOB Services PMI increased from 53.2 to 54.2 in May, up from a preliminary PMI of 53.9. Significantly, higher wages fueled operating costs while the rate of input price inflation eased for the third successive month. Moreover, input price inflation was the softest since April 2021.

Eurozone producer prices also supported investor expectations of a June ECB rate cut and hopes of multiple 2024 interest rate cuts. Producer prices slid by 1.0% in April after falling by 0.4% in March.

Before the European opening bell, the China Caixin Services PMI set the tone, rising from 52.5 to 54.0 in May.

US ADP Employment Change and ISM Services PMIs

Later in the Wednesday session, the US labor market and services sector were in the spotlight.

The ADP reported a 152k increase in nonfarm employment in May after rising by 188k in April. Moreover, the US ISM Services PMI rose from 49.4 to 53.8 in May. Economists forecast the ADP to report a 175k rise in nonfarm employment and an ISM Services PMI of 50.5.

The softer-than-expected ADP numbers and sub-components of the ISM Services PMI fueled investor bets on a September Fed rate cut.

10-year US Treasury yields declined by 1.22% to 4.277% on Wednesday. The US equity markets reacted to the US labor market data and the ISM Services PMI survey. On Wednesday, the Dow advanced by 0.25%. The Nasdaq Composite Index and S&P 500 rallied 1.18% and 1.96%, respectively.

The Wednesday Market Movers

Tech stocks led the Index northwards as investors raised expectations of a September Fed rate cut.

Sartorius AG rallied 4.32%, with Siemens AG ending the session up 2.61%. SAP and Infineon Technologies saw gains of 1.73% and 1.39%, respectively.

However, auto stocks had a mixed midweek session. Daimler Truck Holding rose by 1.64%, with Mercedes Benz Group rising by 0.08%. Volkswagen ended the session flat, while BMW and Porsche saw losses of 0.67% and 0.16%, respectively.

German Factory Orders and Eurozone Retail Sales

On Thursday (June 6), German factory orders and retail sales figures for the Eurozone will attract investor attention.

Economists forecast factory orders to rise by 0.5% in April after declining by 0.4% in March. Upbeat numbers could signal an improving macroeconomic environment. Nevertheless, the figures will unlikely influence the ECB interest rate decision and forward guidance.

However, Eurozone retail sales figures could attract the attention of the ECB. Upward trends in retail sales may fuel demand-driven inflation and affect the post-June ECB interest rate trajectory.

Economists forecast retail sales to increase by 0.2% in April after advancing by 0.8% in March.

While the numbers warrant investor attention, the markets will focus on the ECB interest rate decision and press conference.

ECB Interest Rate Decision and Press Conference

Economists expect the ECB to cut interest rates by 25 basis points on Thursday. However, recent euro area inflation figures created uncertainty about the post-June interest rate trajectory.

A 25-basis point interest rate cut would shift the investor focus to the ECB press conference. The DAX could face selling pressure if ECB President Lagarde pours cold water on investor expectations of multiple 2024 ECB rate cuts.

US Labor Market in Focus

Later in the session on Thursday, US initial jobless claims, unit labor costs, and nonfarm productivity numbers need consideration.

Economists forecast initial jobless claims to increase from 219k to 220k in the week ending June 1. A larger-than-expected increase in jobless claims could fuel investor expectations of a September Fed rate cut.

However, the numbers will likely play second fiddle to the ECB interest rate decision and press conference.

Near-Term Outlook

Near-term trends for the DAX hinge on the ECB interest rate decision and the US Jobs Report. A hawkish ECB rate cut and a softer US labor market could drive buyer appetite for riskier assets.

On the Futures markets, the DAX and the Nasdaq mini were up 73 and 33 points, respectively.

DAX Technical Indicators

Daily Chart

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

A DAX return to the 18,650 level would support a move toward the 18,800 handle.

German factory orders, Eurozone retail sales, US labor market data, and the ECB need consideration.

However, a DAX fall through the 50-day EMA could signal a drop below the 18,200 level.

The 14-day RSI at 53.03 indicates a return to 18,800 before entering overbought territory.

4-Hourly Chart

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

A DAX break above the 18,650 handle would support a move toward the 18,800 level.

Conversely, a DAX break below the 50-day EMA could give the bears a run at 18,200.

The 14-period 4-hour RSI at 50.71 indicates a DAX return to the 18,800 handle before entering overbought territory.