DAX Index Today: Futures Signal 110 Point Drop as the EU and China Plan Talks

Investor hopes of a Q3 2024 ECB rate cut supported a positive Monday session for the DAX amidst waning business confidence in Germany.

The Overview of the DAX Performance

On Monday, June 24, the DAX advanced by 0.89% to 18,326, reversing losses from the Friday, June 21, session.

German Business Sentiment Weakens in June

On Monday, the German economy was in focus. The German Ifo Business Climate Index unexpectedly fell from 89.3 to 88.6 in June. Economists expected the Index to increase to 89.7.

Sentiment across the manufacturing sector waned, with firms more pessimistic about the near-term outlook. However, sentiment across the services sector improved.

The IFO Institute considered the trend in sentiment, saying that the German economy is facing challenges in overcoming stagnation.

Significantly, the less optimistic outlook supported investor expectations of a Q3 2024 ECB rate cut. A deteriorating business environment could impact the labor market and consumer confidence. The net effect could be a pullback in consumer spending and softer demand-driven inflationary pressures.

While the economic data warranted investor attention, China and EU tariffs on electric vehicle imports from China remained a talking point.

Can China convince the EU to drop tariffs and avoid a full-blown trade war?

EU Tariffs on China: Will the EU Drop Tariffs on EV Imports from China?

On Monday, the state-controlled Global Times wrote Beijing requested the EU to end plans to roll out tariffs on EV imports from China.

China and the EU will begin tariff talks this week. An EU Commission spokesperson reportedly said,

“The EU side has emphasized that any negotiated outcome of the investigation must be effective in addressing the injurious subsidization.”

Rather than retaliate, China called for dialogue, easing immediate fears of a full-blown trade war between the EU and China.

However, talks could be lengthy. Bruegel Senior Fellow Alicia Garcia Herrero shared her thoughts on reports of China asking the EU to scrap tariffs, saying,

“Nobody will dare to do this (remove the tariffs) now. Not before the elections in France. The Commission can’t change a decision it has been pondering for months on months on months. Yes, China is putting pressure on the member states, but they would need to vote with a qualified majority against the Commission.”

While the DAX enjoyed a positive start to the week, the US equity markets had a mixed session.

US Equity Markets Face Tech Stock Sell-Off

On Monday, the Dow gained 0.67%, while the Nasdaq Composite Index and the S&P 500 saw losses of 1.09% and 0.31%, respectively.

NVIDIA Corp. (NVDA) slid by 6.68%, impacting buyer demand for AI-related stocks. Investors attributed the mixed session to stock rotation, with investors eyeing buying opportunities on rising bets on a September Fed rate cut.

Pro-trader Matt Caruso shared his views on the pullback in AI-themed stocks, saying,

“So far, markets continue to feel like slow summer rotations rather than any major shifts.”

The Monday Market Movers

Rising bets in a Q3 2024 ECB rate cut fueled buyer demand for high-value stocks. Siemens Energy AG reversed its losses from Friday, rallying 4.02%. Infineon Technologies advanced by 0.19%.

Bank stocks also trended upward. Deutsche Bank and Commerzbank advanced by 2.64% and 1.39%, respectively.

Auto stocks benefited from planned talks between the EU and China on tariffs. BMW gained 2.73%, with Daimler Truck Holding rising by 1.72%, Volkswagen and Mercedes Benz Group saw gains of 1.43% and 1.38%, respectively, with Porsche ending the day up 0.89%.

Updates in talks between the EU and China could prove pivotal for the German auto sector.

French Elections and EU- China Talks

Investors should monitor French Elections-related news and updates from EU-China tariff talks.

A lack of progress toward finding a middle ground on trade terms could affect buyer demand for DAX-listed stocks.

Furthermore, the threat of the far-left and far-right destabilizing the EU Project also needs consideration.

There are no stats from Germany or the Euro area for investors to consider, leaving geopolitics center stage. However, US economic indicators may influence market risk sentiment.

US Consumer Confidence and Fed Speakers in the Spotlight

Later in the session on Tuesday, the US economic calendar will attract investor attention. A larger-than-expected fall in the CB Consumer Confidence Index may raise investor bets on a September Fed rate cut. Economists expect the Index to fall from 102.0 to 100.0 in June.

However, Fed commentary could also move the dial as investors consider US inflation numbers out on Friday.

Calls to further delay the timing of an interest rate cut to Q4 2024 could affect buyer demand for riskier assets. FOMC Members Lisa Cook and Michelle Bowman are on the calendar to speak on Tuesday.

Near-Term Outlook

Near-term trends for the DAX will hinge on the French elections, EU-China Tariff talks, and US inflation numbers. Rising geopolitical tensions and hotter-than-expected US inflation numbers could send the DAX toward 17,500.

On the Futures markets, the DAX was down 110 points on Tuesday, while the Nasdaq mini was up by 55.

Looking toward the Tuesday session, the DAX may need positive news from Beijing to prevent heavy losses.

DAX Technical Indicators

Daily Chart

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

A breakout from the 50-day EMA could signal a DAX return to 18,500. A break above 18,500 may give the bulls a run at the 18,750 handle.

Geopolitics, US economic data, and FOMC Member speeches require investor attention.

Conversely, a DAX drop below 50-day EMA could signal a break below 18,000. A fall through 18,000 could signal a drop toward the 17,615 support level.

The 14-day RSI at 49.01 suggests a fall to the 17,615 support level before entering oversold territory.

4-Hourly Chart

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

A DAX return to 18,500 could signal a move toward the 18,750 handle.

However, a DAX break below the 50-day EMA could give the bears a run at the 200-day EMA. A drop below the 200-day EMA would bring sub-$18,000 into play.

The 14-period 4-hour RSI at 57.17 indicates a DAX break above 18,500 before entering overbought territory.