Dax Index News: Trade and Fed Risks Loom as DAX Eyes 24,000 – Today’s Analysis

DAX Strikes a New Record High as Germany’s Lower House Passes Fiscal Reform Bill

Germany’s lower house passed the fiscal reform bill, marking a historic moment for the once-conservative German government and driving the DAX to a record high. Key reforms include:

• An effective end to the debt brake to boost defense spending.
• A €500 billion infrastructure fund and a €100 billion climate and economic transformation fund.

Jeroen Blokland, founder of the Blokland Smart Multi-Asset Fund, underscored the vote’s significance:

“Have we just witnessed the end of an era? German lawmakers just passed what may well be the biggest spending package in history. Germany, with its constitutional debt brake, is one of very few major economies, that has a debt-to-GDP ratio close to the 60% of the Maastricht Treaty. Will this be the trigger that puts Germany on the path of France and Italy? Did Germany just prove the world has indeed become a debt-driven system? I guess it did…”

The DAX extended Monday’s gains, rising 0.98% to close at 23,381. Germany’s upper house will vote on the fiscal reform bill on Friday, March 21.

DAX Winners: Defense Stocks Lead Autos and Banks Higher

The progress toward debt brake reforms and fiscal expansion boosted defense and banking stocks.

• Defense Sector: Rheinmetall AG surged 5.67% in anticipation of a sharp increase in defense spending.
• Banking Sector: Fiscal reforms could also boost economic activity and credit demand in a higher-rate environment. Deutsche Bank jumped 4.26%, while Commerzbank rallied 3.16%.
• Auto Sector: The lack of recent tariff threats from Trump supported auto stocks. Porsche and Mercedes-Benz Group gained 2.62% and 2.34%, respectively.

Eurozone Trade Surplus Narrows Amid Tariff Threats

The Eurozone’s trade surplus fell from €15.4 billion in December to €1 billion in January amid threats of US tariffs on EU goods. Exports rose 3% year-on-year (YoY) in January, while imports increased 7.6% YoY.

Exports to the US increased 16% YoY, while imports from the US rose 7.5%, widening the trade surplus with the US to €16.2 billion. However, January’s trade data could face scrutiny from President Trump, potentially raising the risk of tariffs.

Last week, Trump threatened 200% tariffs on EU wine and spirits after the EU rolled out 50% tariffs on US whiskey. Trump has also threatened 25% tariffs on autos, semiconductors, and pharmaceuticals.

Meanwhile, expectations of fiscal reforms boosted sentiment toward the German economy. Germany’s ZEW Economic Sentiment Index surged from 26 in February to 51.6 in March, reflecting improving market confidence.

US Housing Data Signals Long-Term Demand Weakness

On Tuesday, March 18, US Housing Starts rebounded 11.2% month-on-month in February, recovering from an 11.5% slide in January. However, Building Permits fell 1.2% in February, marking a continued downward trend that suggests weaker long-term demand.

Housing market trends are important as economists consider the sector a barometer for the US economy. A cooling housing market may affect consumer sentiment, spending, and GDP growth.

US Markets Dip as Focus Shifts to the Fed

US equity markets posted losses on Tuesday, March 18, snapping a two-day winning streak. Concerns over the economic outlook and uncertainty surrounding the Fed’s policy stance weighed on risk assets.

The Nasdaq Composite Index and the S&P 500 declined by 1.71% and 1.07%, respectively, while the Dow dropped 0.62%.

A CNBC Fed Survey highlighted the growing risk of a US recession on Tuesday. According to the March survey, the chances of a recession rose to 36%, up from 23% in January. Respondents attributed the gloomier outlook to US tariffs.

Fed Rate Decision and Economic Projections in Focus

While fiscal reforms and trade developments remain key market drivers, the Fed’s policy outlook also needs consideration.

On Wednesday, March 19, investors will monitor:

• FOMC Interest Rate Decision – The Fed is expected to hold rates at 4.5%.
• Economic Projections – Revisions to GDP growth, inflation, and rate expectations.
• Powell’s Press Conference – Insights into the Fed’s stance on inflation and recession risks.

A dovish Fed could boost demand for risk assets, while a hawkish stance may pressure rate-sensitive stocks.

Near-Term Outlook: Key Drivers

The DAX’s near-term outlook hinges on:

• German fiscal policy: Friday’s Upper House vote will be crucial for DAX trends.
• Tariff developments: US-EU and US-China tariff disputes remain in focus.
• Fed policy outlook: Economic projections and rate decisions will drive volatility.

Potential DAX Scenarios:

• Bullish Case: Easing trade tensions, fiscal stimulus, and dovish central bank policies could drive the DAX toward 24,000.
• Bearish Case: Fiscal stimulus resistance, escalating trade disputes, or a hawkish Fed could drag the DAX toward 22,750.

As of Wednesday morning, the DAX futures were down 10 points, while the Nasdaq 100 mini gained 39 points, signaling a choppy mid-week session.

DAX Technical Indicators

Daily Chart:

The DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs), suggesting strong bullish momentum. However, tariff and fiscal-driven volatility pose potential short-term downside risks.

A breakout above Tuesday’s record high of 23,476 would support a move toward 23,750. A move to 23,750 may enable the bulls to target 24,000.

Conversely, if the DAX breaks below 23,350, it may test support at 23,000. A fall through 23,000 would bring 22,500 into sight.

With the RSI at 61.50, the DAX remains below overbought levels (above 70), signaling room for a climb above its all-time high of 23,476 toward 23,750.

Conclusion: Key Drivers to Watch

Traders should monitor:

• Developments in German fiscal policy.
• US-EU and US-China trade tensions.
• The Overnight Fed interest rate decision, FOMC Economic Projections, and Fed Chair Powell’s press conference.

Stay ahead with our in-depth analysis of the DAX, trade policies, and global economic trends. Read our latest reports here for insights into market opportunities and risks.