The DAX rose by 0.15% on Wednesday, ending the session at 18,015. Notably, it reached a new all-time high of 18,045 and held steady above the 18,000 mark.
On Wednesday, German producer prices declined by 4.1% year-on-year in February, following a 4.4% drop in January. Analysts predicted a 3.8% decrease in producer prices.
Month-on-month, producer prices fell by 0.4%, compared to a 0.2% increase in January. Economists expected a 0.1% decline in producer prices.
The lower-than-expected figures support expectations of a rate cut by the ECB in June. Lower producer prices are usually a result of weaker demand, which affects consumer price inflation.
Later in the session, Eurozone consumer confidence numbers exceeded expectations. The Eurozone Consumer Confidence Indicator rose from -15.5 to -14.9 in March.
ECB President Christine Lagarde’s remarks also supported the market’s view of a rate cut in June. She mentioned in a statement:
“By June, we will have a new set of projections that will confirm whether the inflation path we foresaw in our March forecast remains valid.”
There were no significant US economic indicators for investors to consider. However, the Fed’s interest rate decision and Economic Projections were announced after the European session.
On Wednesday, the FOMC maintained interest rates at 5.50%. Additionally, the FOMC projected a median Fed Funds Rate of 4.6% for 2024, unchanged from December. This projection indicates three Fed rate cuts in 2024 and increased demand for higher-risk assets. The upward revision of the 2024 growth forecast was also positive for the market.
Fed Chair Powell chose not to unsettle the markets, stating that the Fed will likely cut rates later in the year.
On Wednesday, the Dow and the Nasdaq Composite recorded gains of 1.25% and 1.03% respectively, while the S&P 500 advanced by 0.89%.
BASF led the way with a 2.53% rally after a stock upgrade from hold to buy.
However, auto and bank stocks had a mixed performance mid-week as investors awaited the Fed policy decision and projections.
Commerzbank gained 0.12%, while Deutsche Bank declined by 0.71%. Bank stocks came under scrutiny after reports of the US investigating Raiffeisen’s plans to acquire a stake in a construction group controlled by sanctioned Russian businessman Oleg Deripaska.
Porsche and Volkswagen saw gains of 0.66% and 0.22% respectively, while BMW and Mercedes Benz Group declined by 0.71% and 0.47% respectively.
Preliminary private sector PMIs for Germany and the Eurozone should be closely watched on Thursday. A milder contraction in the private sector of Germany and the euro area could generate demand for DAX-listed stocks.
Analysts forecast the German manufacturing PMI to rise from 42.5 to 43.1 in March. Additionally, they predict the services PMI to increase from 48.3 to 48.8.
The Eurozone has more positive economic predictions. Economists anticipate an increase in the manufacturing PMI from 46.5 to 47.0 and in the services PMI from 50.2 to 50.5.
Investors should also consider sub-components, including prices, which could impact expectations of a rate cut in June.
Besides the data, the ECB Economic Bulletin and any related commentary should also be carefully considered.
Later in the day, jobless claims and private sector PMIs in the US will also draw investor attention.
An increase in service sector activity and tighter labor market conditions could challenge expectations of a June rate cut by the Fed.
Analysts expect the US Services PMI to decline from 52.3 to 52.0 and the Manufacturing PMI to fall from 52.2 to 51.7. Additionally, they predict that initial jobless claims will rise from 209k to 215k in the week ending Mar 16.
Other statistics to watch include the Philly Fed Manufacturing Index and existing home sales. A larger than expected drop in the Philly Fed Index would capture investor interest. Economists forecast it to decline from 5.2 to -2.3 in March.
In addition to the data, investors should consider commentary from FOMC members. FOMC member Michael Barr is scheduled to speak.
Short-term trends for the DAX will be influenced by private sector PMIs from the euro area and the US. An increase in demand but downward price trends could boost interest in buying DAX-listed stocks.
In the futures market, the DAX and Nasdaq mini were up 173 and 111 points respectively.
The DAX remains well above the 50-day and 200-day EMAs, indicating bullish price signals.
A return to the Mar 20 all-time high of 18,045 would support a further move towards the 18,200 level.
Investors should closely follow private sector PMIs and central bank commentary.
On the other hand, a drop below the 18,000 mark could lead to a retreat to the 50-day EMA.
The 14-day RSI at 77.00 indicates that the DAX is overbought. Selling pressure may intensify around the Mar 20 high of 18,045.
The DAX remains above its 50-day and 200-day EMAs, confirming bullish price signals.
A breakout from the Mar 20 all-time high of 18,045 would give the bulls an opportunity to reach the 18,200 mark.
However, if the price drops below the 18,000 mark, it may signal a retreat to the 50-day EMA.
The 14-period 4-hour RSI at 61.67 indicates that the DAX may rise above 18,100 before entering overbought territory.
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