DAX Index News: ECB Rate Cut Outlook Lifts Hopes for DAX Rebound – Expert Analysis

Market Overview

On Tuesday, October 1, the DAX dropped by 0.58%, following a 0.76% loss on Monday, to close at 19,213. Fears of Iran attacking Israel left the DAX in negative territory.

Military Stocks Rally Amid Geopolitical Tensions

Auto stocks extended their losses from Monday as lower profit forecasts continued to impact buyer demand.

Volkswagen slid by 1.82%, while BMW and Daimler Truck Holding saw declines of 1.82% and 1.43%, respectively.

Risk aversion also left retail-linked stocks Zalando SE (-2.09%) and Adidas (-2.14%) in negative territory.

However, concerns about an Iran attack on Israel drove buyer demand for military stocks. Rheinmetall AG rallied 5.06%.

Eurozone Inflation Boosts ECB Rate Cut Expectations

On Tuesday, inflation figures for the Eurozone raised investor bets on an October ECB rate cut. The annual inflation rate fell from 2.2% in August to 1.8% in September. Notably, the inflation rate dropped below the ECB’s 2% target for the first time since April 2021.

A more dovish ECB rate path could lower borrowing costs, possibly boosting company earnings and stock prices.

Other stats included finalized manufacturing sector PMIs, which painted a gloomy picture of the German and Eurozone economies.

Expert Views on Eurozone Inflation and the ECB Rate Path

Daniel Kral, Europe Macro Specialist at Oxford Economics, reacted to the inflation figures, stating,

“Eurozone headline inflation dipped to below 2% in September for the first time in over 3 years. But the drop in the annual rate vs August was driven solely by energy prices, down by 6% y/y. Food, goods, and services prices largely unchanged. Not quite what ECB would have liked.”

Eurozone Unemployment to Influence the ECB Rate Path

On Wednesday, October 2, unemployment figures for the Eurozone will draw interest. Economists expect the Eurozone unemployment rate to hold steady at 6.4% in August. Higher unemployment could increase speculation about an October ECB rate cut. Rising bets on an ECB rate cut may push the DAX toward 19,500.

However, investors should track commentary from ECB policymakers. ECB Chief Economist Philip Lane is on the calendar to speak. Reaction to the inflation figures and insights into the ECB’s monetary policy goals could move the dial.

US JOLTs Job Openings Defy Expectations

On Tuesday, JOLTs Job Openings increased from 7.711 million in July to 8.040 million in August. Higher job openings could drive job creation and wage growth, possibly boosting consumer spending. An upward trend in consumer spending may support expectations of a soft US economic landing as it contributes over 60% to GDP.

A resilient US labor market and expectations of a soft landing could reduce expectations of aggressive Fed rate cuts, possibly impacting demand for DAX-listed stocks. The Fed rate path will likely affect the DAX more than increasing expectations of a soft landing.

US Market Trends

On Tuesday, the US equity markets closed the session in negative territory. The Nasdaq Composite Index slid by 1.53%, while the S&P 500 and the Dow declined by 0.93% and 0.41%, respectively. Investors reacted to news of an Iranian missile strike on Israel, which affirmed earlier fears of a possible attack.

US Economic Calendar: ADP Employment Report in Focus

On Wednesday, the US labor market will be in focus. Economists forecast the ADP to report a 120k increase in employment in September, up from 99k in August.

A larger-than-expected increase could raise expectations of a soft US landing. However, upbeat numbers could also reduce bets on a 50-basis points November Fed rate cut. Falling bets on a 50-basis points Fed rate cut could drag the DAX toward 19,000.

Near-Term Outlook

Near-term DAX trends will likely hinge on Eurozone and US labor market data and central bank commentary. Weaker labor market conditions could fuel bets on multiple Q4 2024 ECB and Fed rate cuts, supporting a DAX move toward 19,500. Conversely, weak stats from the US could retrigger fears of a hard US landing, possibly sending the DAX below 19,000.

News updates from the Middle East also require consideration. A further escalation in the conflict could trigger a flight to safety, impacting demand for riskier assets.

The futures markets signal a mixed start to the Wednesday session, with the DAX up by 65 points, while the Nasdaq mini was down by 5 points.

Investors should stay alert to updates on the Middle East conflict, central bank chatter, and economic indicators. Stay informed with our latest news and analysis to manage your risks effectively.

DAX Technical Indicators

Daily Chart

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

A break above Friday’s all-time high of 19,492 could signal a move toward 19,650. Furthermore, a breakout from 19,650 may give the bulls a run at the 19,750 level.

Investors should focus on labor market data, central bank commentary, and updates from the Middle East, which may influence near-term market sentiment.

Conversely, a fall through Monday’s low of 19,144 could signal a drop below the 19,000 level. A break below 19,000 may bring the 18,750 level into play.

The 14-day RSI at 60.61 indicates a climb to 19,500 before entering overbought territory.