Dax Index News: Rate Cut Bets Propel DAX to Record Levels, Markets Eye 19,750

DAX Strikes All-Time High on ECB Rate Cut and Forward Guidance

On Thursday, October 17, the DAX advanced by 0.77%, recovering a 0.27% loss from the previous session to close at 19,583. Significantly, the DAX climbed to an all-time high of 19,675.

Expectations of a 25-basis point December ECB rate cut and signals of a soft Euro area landing drove demand for DAX-listed stocks.

Earnings Boost Key Stocks

Several DAX-listed companies saw sizeable gains on Thursday. Sartorius AG surged 16.45% on better-than-expected order intakes, while Merck rallied by 7.56%.

Siemens Energy AG (+4.20%), Airbus Group (+3.84%), and Siemens AG (+1.81%) responded to the ECB rate cut and outlook for December.

Eurozone Inflation Support ECB Rate Cut Expectations

Eurozone inflation data on Thursday raised expectations of multiple ECB rate cuts. The annual inflation rate fell from 2.2% in August to 1.7% in September, below the initial estimates. Softer inflation figures bolstered expectations of a 25-basis point December ECB rate cut.

ECB Monetary Policy

On Thursday, the ECB cut rates by 25 basis points, aligned with market expectations. Softer inflation and concerns about the macroeconomic environment raised bets on a December rate cut, further driving demand for DAX-listed stocks. Lower borrowing costs may support corporate profits and stock prices.

Expert Views on Euro Area Inflation and ECB Rate Path

Frederik Ducrozet, Head of Macroeconomic Research at Pictet Wealth Management, commented on the ECB monetary policy decision, stating,

“Our impression is that the bar for the ECB to cut rates at every meeting is low. Given the headwinds to growth, not least related to fiscal tightening, the risk is that the ECB will have to cut rates even lower below neutral.”

Frederik also highlighted the significance of the October rate cut, saying,

“The ECB never cut rates at a regular meeting in October. The only time they did cut rates in October was in 2008, following an emergency meeting.”

US Retail Sales and Jobless Claims Cool Multiple Fed Rate Cut Bets

On Thursday, US retail sales increased by 0.5% in September after a 0.1% rise in August. Upward trends in consumer spending could fuel demand-driven inflation, potentially delaying post-November Fed rate cuts.

Initial jobless claims fell from 260k (week ending October 5) to 240k (week ending October 12), suggesting stable labor market conditions. Stable labor market conditions would support wage growth and consumer spending.

The economic indicators eased expectations for a December Fed rate cut. According to the CME FedWatch Tool, the chances of a 25-basis point December Fed rate cut fell from 85.6% (October 16) to 74.3% (October 17).

US Market Trends

On Thursday, US Equity Markets had a mixed session, with the upbeat US data influencing risk sentiment. The Dow and Nasdaq Composite Index saw gains of 0.37% and 0.04%, respectively, while the S&P 500 dipped by 0.02%.

Corporate earnings and AI stocks contributed to the gains for the Dow and the Nasdaq. Travelers Companies Inc. (TRV) surged 9% on better-than-expected earnings.

US Economic Calendar: Fed Speakers in Focus

On Friday, October 18, US housing sector data will draw interest. However, FOMC member speeches will likely impact sentiment toward the Fed rate path more. FOMC members Raphael Bostic and Christopher Waller are on the calendar to speak.

Their views on inflation, the economic outlook, the labor market, and the Fed rate path could influence demand for DAX-listed stocks.

Calls to delay a December Fed rate cut could pull the DAX below 19,500. Conversely, support for rate cuts in November and December may drive the DAX toward 19,750.

Near-Term Outlook

In the near term, trends will hinge on central bank commentary and corporate earnings. Dovish comments and expectations of soft landings could boost demand for DAX-listed stocks.

On Friday, the futures pointed to a mixed opening, with the DAX down 75 points, while the Nasdaq mini was up by 1 point. From the Asian session, crucial economic data from China could influence market risk sentiment, with growth slowing less than expected and September data signaling a pickup in economic activity.

Investors should stay alert, with corporate earnings and central bank commentary in focus. Stay informed with our latest news and analysis to manage your risks effectively.

DAX Technical Indicators

Daily Chart

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

A breakout from the October 17 all-time high of 19,675 could give the bulls a run at 19,750. Furthermore, a break above 19,750 may signal a move toward the 20,000 level.

Investors should consider corporate earnings and central bank speeches, which may influence near-term market sentiment.

Conversely, a drop below 19,500 could bring the 19,350 level into play.

The 14-day RSI at 65.67 indicates a DAX climb to 19,750 before entering overbought territory.