DAX Index Today: The German Economy and Corporate Earnings in the Spotlight

The Overview of the DAX Performance

The DAX gained 0.96% on Monday (May 6). Following a 0.59% rise on Friday (May 3), the DAX ended the session at 18,175.

German Services PMI and the ECB

On Monday (May 6), German service sector activity attracted investor interest. The German HCOB Services PMI increased from 50.1 to 53.2 in April, revised down from a preliminary 53.2.

Nonetheless, the pickup in service sector activity drove buyer demand for DAX-listed stocks.

The Eurozone HCOB Services PMI contributed to the positive session, rising from 51.5 to 53.3.

Significantly, the PMI numbers coincided with market-friendly ECB commentary. ECB Chief Economist Philip Lane voiced expectations that inflation would return to the 2% target by mid-2025.

Fed Rate Cut Expectations Support Demand for Riskier Assets

On Monday (May 6), FOMC member Thomas Barkin and Fed Vice Chair John Williams garnered investor interest. Both saw Fed monetary policy in the position to return inflation to the 2% target. While supporting the current monetary policy stance, investors took the comments positively. An inflation fall toward the 2% target could raise expectations of a September Fed rate cut.

On Monday (May 6), the Nasdaq Composite Index rallied 1.19%. The Dow and the S&P 500 advanced by 0.46% and 1.03%, respectively.

The Monday Market Movers

Zalando SE was among the front runners, rallying 2.65% on rising bets on an ECB rate cut.

Tech stocks also benefitted from sentiment toward the ECB rate path. Infineon Technologies and SAP advanced by 2.50% and 0.45%, respectively.

Auto stocks had a positive Monday session. News of Volvo reporting a 27% increase in sales drove buyer demand for auto stocks. Mercedes Benz Group and Volkswagen saw gains of 1.33% and 1.26%, respectively. Porsche advanced by 0.82%, with BMW rising by 0.54%. However, Daimler Truck Holdings continued to trend lower after recent warnings about the European market, falling by 0.95%.

German Trade, Factory Orders, and Corporate Earnings in Focus

On Tuesday (May 7), German factory orders and trade data will warrant investor attention.

Economists forecast factory orders to increase by 0.5% in March after rising by 0.2% in February. Furthermore, economists expect the trade surplus to widen from €21.4 billion to €22.4 billion in March. However, investors should consider the import and export figures.

An improving demand environment would align with expectations of a pickup in economic activity.

Beyond the economic calendar, corporate earnings also need consideration. Ferrari, Unicredit, Siemens Healthineers, Deutsche Post, Infineon Technologies, and Zalando SE are among the big names to release earnings results.

US Economic Sentiment, FOMC Member Chatter, and US Corporate Earnings

Later in the Tuesday session, the RCM/TIPP Economic Optimism Index will draw investor interest. An unexpected fall could test market risk sentiment following the softer-than-expected US Jobs Report and ISM Services PMI.

Economists forecast the Index to increase from 43.2 to 44.1 in May.

FOMC member commentary also needs consideration amidst investor expectations of a September Fed rate cut. FOMC member Neel Kashkari is on the calendar to speak. Views on the economic outlook, inflation, and the timing of a Fed rate cut could move the dial.

Furthermore, corporate earnings could also influence buyer appetite for riskier assets. Walt Disney (DIS) is among the big names to release earnings results.

Near-Term Outlook

Near-term trends for the DAX will hinge on the central bank commentary, corporate earnings, and economic indicators from Germany. Better-than-expected stats, positive earnings results, and dovish central bank chatter could fuel buyer demand for DAX-listed stocks.

On the Futures markets, the DAX was up by 52 points, while the Nasdaq mini was down by 11 points.

DAX Technical Indicators

Daily Chart

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

A DAX breakout from the 18,200 handle could give the bulls a run at 18,350. A DAX break above the 18,350 handle could signal a move toward the April 2 all-time high of 18,567.

German economic indicators, central bank commentary, and corporate earnings need consideration.

However, a DAX drop below 18,000 would bring the 50-day EMA into play. A fall through the 50-day EMA could give the bears a run at the 17,615 support level.

The 14-day RSI at 55.94 suggests a DAX return to the 18,567 all-time high before entering overbought territory.

4-Hourly Chart

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

A DAX break above 18,200 would support a move toward 18,350.

Conversely, a DAX break below the 50-day EMA could give the bears a run at the 200-day EMA and the 17,615 support level.

The 14-period 4-hour RSI at 60.98 suggests a DAX return to 18,500 before entering overbought territory.