Dax Index News: DAX Outlook Turns Positive as US Fed Cuts Rates

DAX Rebounds in Risk-On Sentiment

On Thursday, November 7, the DAX rallied 1.70%, reversing a 1.13% loss from the previous session, closing at 19,363. German politics contributed to the gains as Chancellor Olaf Scholz sacked his finance minister, opening the door to a snap election. Markets hope for a less fiscally frugal finance minister to boost spending.

Major Stock Movers: Defense Stocks Surge on Defense Spending Bets

Defense stock Rheinmetall AG surged by 9.28% on expectations of increased defense spending. Airbus and MTU Aero also benefitted, advancing by 1.45% and 0.09%, respectively.

The auto sector was in recovery mode after the negative reaction to Trump’s US presidential election win. BMW and Daimler Truck Holding led the gains, rising by 2.92% and 2.92%, respectively.

German Economic Indicators Highlight Manufacturing Sector Woes

On Thursday, German trade and industrial production data painted a gloomier picture of Germany’s economy. Exports slid by 1.7%, while industrial production dropped by 2.5% in September.

The September numbers aligned with expectations for the German economy to contract by 0.2% in the 2024 calendar year. A weaker economic outlook might pressure the ECB to cut interest rates to support struggling manufacturers.

Expert Views on the German Economy

Daniel Kral, a macro specialist at Oxford Economics, commented on the economic data from Germany:

“Still no end to Germany’s industrial misery with another broad-based drop in September as the large rise in automotive output in August was fully reversed. Overall, industrial production is now down by over 17% compared to end-2017. This is real crisis territory.”

US Jobless Claims Support US Soft Landing Bets

On Thursday, initial jobless claims increased slightly from 218k in the week ending October 25 to 221k in the week ending November 2. The modest rise supported investor expectations for a soft US economic landing.

Nevertheless, the uptick in jobless claims also bolstered expectations for a December Fed rate cut, driving buyer demand for riskier assets.

Fed Cuts Rates, Sparking US Equity Rally

After the European closing bell, the Fed cut interest rates by 25 basis points, fueling a US equity market rally. Lower borrowing costs might improve company earnings, potentially driving stock prices higher.

Fed Chair Powell signaled more rate cuts during the FOMC press conference, contributing to the market gains.

Mixed Performance in US Equity Markets

On Thursday, November 7, US equity markets had a mixed session. The Nasdaq Composite Index and the S&P 500 saw gains of 1.51% and 0.74%, respectively, while the Dow closed flat.

Super Micro Computer (SMCI) led the Nasdaq gains, jumping 12.25%, partially reversing an 18.05% slump from the previous session.

Focus on US Consumer Sentiment and Fed Commentary

On Friday, November 8, Michigan Consumer Sentiment Index figures require consideration. Economists predict the Index will rise from 70.5 in October to 71.0 in November. A larger-than-expected increase might temper expectations for a December Fed rate cut.

Improved consumer sentiment could fuel spending and demand-driven inflation. The Fed could delay further rate cuts to curb spending and dampen inflationary pressures. A less dovish Fed rate path could affect rate-sensitive DAX-listed stocks.

Beyond the numbers, investors should monitor FOMC member commentary. FOMC member Michelle Bowman is on the calendar to speak. Her views on Trump’s policy influences on the Fed rate path could move the dial.

Near-Term Outlook

In the near term, DAX trends will likely hinge on tariff-related news and sentiment toward ECB and Fed rate paths. Rising bets on a more dovish ECB rate path and a December Fed rate cut could boost the DAX. However, the threat of Trump tariffs on German goods will remain a potential headwind for the DAX.

Futures suggest a positive opening for Friday’s session. DAX futures were up 36 points, while the Nasdaq mini futures advanced by 2 points. Market hopes for a stimulus package from Beijing supported buyer appetite for HK and Mainland China-listed stocks, possibly setting the tone for the European session.

Investors should monitor President-elect Donald Trump-related news, central bank comments, and economic data. Stay updated with our latest news and analysis to manage risks effectively.

DAX Technical Indicators

Daily Chart

After Thursday’s rally, the DAX hovers above the 50-day and 200-day EMAs, sending bullish price signals.

A DAX break above Thursday’s high of 19,418 could signal a move to 19,500. Furthermore, a return to 19,500 could allow the bulls to target the all-time high of 19,675.

ECB chatter, US consumer sentiment figures, FOMC member speakers, and Trump policies need consideration.

Conversely, a DAX break below the 50-day EMA and 19,000 could bring the 18,750 level into play.

With the 14-day RSI at 53.38, the DAX could climb to its all-time high before signaling overbought conditions.