DAX Index: Trade Data, ECB President Lagarde, and Earnings in Focus

Highlights

• The DAX gained by 0.38% on Wednesday, closing the session at 16,946.
• On Thursday, corporate earnings, Eurozone trade data, and ECB President Christine Lagarde will be in focus.
• Later in the session, US economic data and Fed speeches also need consideration.

Overview of the DAX Performance on Wednesday

The DAX gained 0.38% on Wednesday. Partially reversing a 0.92% loss from Tuesday, the DAX ended the session at 16,946.

Eurozone Labor Market Performed Better Than Expected

On Wednesday, economic data for the Eurozone eased fears of a Eurozone economic recession. The Eurozone economy stalled in Q4 quarter-on-quarter, according to second estimate numbers. The economy contracted by 0.1% in Q3. Year-over-year, the economy expanded by 0.1% after stalling in Q3. There were no changes to the first estimate figures.

However, Eurozone employment figures for Q4 beat expectations. Employment increased by 0.3% quarter-on-quarter in Q4 after rising by 0.2% in Q3. Year-on-year, employment was up 1.3%

Eurozone industrial production figures were also upbeat. Industrial production surged by 2.6% in December after increasing by 0.4% in November. Economists forecast a 0.2% decline. Significantly, industrial production for the Eurozone impressed despite a 1.6% slide in German industrial production.

The latest report suggested the Eurozone economy may avoid a recession despite the German macroeconomic environment.

Fed Chatter Offered Late Support

On Wednesday, FOMC member Austan Goolsbee reacted to the hotter-than-expected US CPI Report. The Chicago Fed President reportedly said the Fed should be cautious about delaying interest rate cuts. Notably, Goolsbee believed inflation would continue to decline toward the 2% target despite a possible pickup in inflationary pressures near-term.

There were no US economic indicators to consider on Wednesday. 10-year US Treasury yields declined by 1.37% to 4.259%, supporting riskier assets.

On Wednesday, the Nasdaq Composite and S&P 500 ended the day with gains of 1.30% and 0.96%, respectively. The Dow rose by 0.40%.

The Wednesday Market Movers

Retail-linked stocks were among the front-runners. Zalando SE and Adidas saw gains of 1.48% and 2.50%, respectively.

Infineon Technologies and SAP ended the day up 1.32% and 1.30% as tech stocks rebounded from the Tuesday sell-off.

However, auto stocks had a mixed session. BMW and Mercedes-Benz Group ended the day up 0.28% and 0.14%, respectively. Volkswagen and Porsche declined by 0.71% and 0.43%, respectively.

Eurozone Trade Data, ECB President Lagarde, and Corporate Earnings

On Thursday, Eurozone trade data will garner investor interest. Economists forecast the Eurozone trade surplus to widen from €20.3 billion to €21.5 billion in December. However, economists must consider import and export figures. Weak imports and exports would signal a weakening demand environment.

The German trade surplus widened in December because of imports falling more than exports. A similar trend could refuel fears of a Eurozone economic recession.

Beyond the numbers, ECB commentary also needs consideration. ECB President Christine Lagarde is on the calendar to speak. Support for an April ECB interest rate cut could drive demand for DAX-listed stocks.

However, earnings results will also move the dial. Airbus Group, Stellantis NV, Pernod Ricard, Orange, Commerzbank, Renault, and Schneider Electric are among the big names to release earnings in Europe.

US Economic Data and Fed Speakers in Focus

US jobless claims and retail sales will draw investor interest. After the hotter-than-expected US CPI Report, the numbers could influence bets on an H1 2024 Fed rate cut.

Economists forecast retail sales to decline by 0.1% in January and jobless claims to rise from 218k to 220k. An unexpected increase in retail sales and tighter labor market conditions may temper bets on an H1 2024 Fed rate cut.

However, investors must also consider FOMC member commentary. FOMC member Christopher Waller is on the calendar to speak on Thursday. Reaction to the US CPI Report and views on interest rate cuts would move the dial.

Beyond the economic calendar, US corporate earnings will also influence market risk sentiment. Coinbase (COIN) and Deere & Co. (DE) are among the big names to release earnings results.

Short-term Forecast

Near-term trends for the DAX will hinge on economic indicators and central bank commentary. Better-than-expected US retail sales could reduce bets on an H1 2024 Fed rate cut. However, upbeat corporate earnings could offset fears of a more hawkish Fed rate path.

On Wednesday, the DAX futures were up 43 points, while the Nasdaq mini was down 7 points.

DAX Technical Indicators

Daily Chart

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

A DAX move to 17,000 would bring the all-time high of 17,050 and the 17,100 handle into play.

On Thursday, economic data, corporate earnings, and central bank commentary need consideration.

However, a fall through the 16,850 handle would give the bears a run at the 50-day EMA.

The 14-day RSI at 55.98 suggests a DAX rise to 17,100 before entering overbought territory.

4-Hourly Chart

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

A DAX move to the all-time high of 17,050 would give the bulls a run at 17,100.

However, a break below the 50-day EMA would support a fall toward the 16,750 handle.

The 14-period 4-hour RSI at 51.21 suggests a rise to the 17,100 handle before entering overbought territory.