DAX Index: ZEW Economic Sentiment and the US CPI Report to Impact

Highlights

• The DAX rose by 0.21% on Monday, ending the session at 16,794.
• On Tuesday, ZEW Economic Sentiment numbers for Germany and the Eurozone are focal points.
• The US CPI Report will be the key driver as investors prepare for Wednesday’s Fed interest rate decision, projections, and press conference.

Overview of the DAX Performance on Monday

The DAX rose by 0.21% on Monday. Following a 0.78% gain on Friday, the DAX ended the Monday session at 16,794. Significantly, the DAX struck a new All-Time High (ATH) of 16,818.

Goldman Sachs and Inflation Bets

On Monday, news hit the wires of Goldman Sachs (GS) raising its 12-month forecast for the STOXX 600. Goldman Sachs raised its outlook based on expectations of ECB rate cuts in 2024. The expectations of ECB rate cuts continue to drive buyer demand for DAX-listed stocks.

Significantly, the DAX struck a new ATH on Monday despite the weak macroeconomic backdrop. While survey-based reports suggest an improving environment, factory orders, industrial production, and trade data paint a gloomier picture.

There were no economic indicators from the euro area to influence investor sentiment on Monday.

US Consumer Inflation Expectations Dax Friendly

On Monday, US Consumer Inflation Expectations showed consumers projecting softer inflation. US Consumer Inflation Expectations softened from 3.6% to 3.4% in November. Economists forecast a pickup to 3.8%. The softer-than-expected figures support a late move to a new ATH.

The US equity markets also ended the Monday session in positive territory. However, investors remained cautious before Tuesday’s US CPI Report. On Monday, the Nasdaq Composite Index rose by 0.20%, with the Dow and the S&P 500 gaining 0.43% and 0.39%, respectively.

The Monday Market Movers

Investor caution ahead of the US CPI Report was evident. Consumer-linked stock Zalando SE slid by 2.47%. Siemens Energy AG fell by 2.46%. Morgan Stanley (MS) downgraded Encavis, another renewable energy producer, from equal weight to underweight, affecting renewable energy stocks.

However, auto stocks continued to move northward on ECB rate cut bets. Volkswagen gained 0.70%, with Daimler Truck Holding ending the session up 0.56%. BMW and Mercedes Benz Group rose by 0.38% and 0.29%, respectively. Porsche increased by 0.13%.

ZEW Economic Sentiment in Focus

On Tuesday, ZEW Economic Sentiment numbers for Germany and the Eurozone will draw investor interest. A slide in analyst sentiment toward the respective economies could affect buyer demand for DAX-listed stocks.

The ZEW numbers are unlikely to influence the ECB interest rate trajectory. However, weaker-than-expected numbers could fuel bets on a prolonged euro area recession.

Economists forecast the German ZEW Economic Sentiment Indicator to fall from 9.8 to 8.8 in December. Weaker numbers would align with recent non-survey-based stats from Germany and the Eurozone. Economists expect the Eurozone ZEW Economic indicator to fall from 13.8 to 11.2.

Beyond the numbers, investors must also monitor ECB commentary. ECB Executive Board member Elizabeth McCaul is on the calendar to speak. Comments relating to discussions on interest rate cuts would influence the buyer appetite for DAX-listed stocks.

US CPI Report in the Spotlight

Later in the Tuesday session, the US CPI Report will be the focal point. Sticky US inflation could force the Fed to maintain a higher for longer interest rate trajectory. A more hawkish Fed rate path could impact investor appetite for riskier assets.

An elevated rate path would keep borrowing costs elevated, impacting profitability.

Economists forecast the US annual inflation rate to soften from 3.2% to 3.1% in November. However, economists expect the core inflation rate to hold steady at 4.0%.

The futures markets pointed to a positive start to the Tuesday session. The DAX and the Nasdaq mini were up 30 and 24 points, respectively.

Short-Term Forecast

Near-term trends for the DAX will depend on the US CPI Report (Tues), the Fed, and the ECB. A hawkish Fed and an ECB unwilling to consider discussions on rate cuts could temper market bets on central banks easing monetary policy. The net effect could be bearish for the DAX, with a higher-for-longer rate path likely to impact the euro area economy.

DAX Technical Indicators

Daily Chart

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

A DAX breakout from the Monday ATH 16,818 would give the bulls a run at the 17,000 psychological resistance level.

ZEW Economic Sentiment and the US CPI Report are focal points on Tuesday.

However, a fall through the 16,750 handle would bring the 16,470 support level into play.

The 14-day RSI reading of 84.22 shows the DAX in overbought territory. Selling pressure could intensify at the Monday ATH of 16,818.

4-Hourly Chart

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

A DAX move through the Monday ATH of 16,818 would support a move toward the 17,000.

However, a fall through the 16,750 handle would give the bears a run at the 16,470 support level.

The 83.09 14-4 hour RSI shows the DAX in overbought territory. Selling pressure may intensify at the all-time high of 16,818.

For a look at the economic events, check out our economic calendar.