Thursday, September 21, 2023 - The DAX, Germany's stock index, rebounded today with a 0.75% rise, partially offsetting Wednesday's 0.40% loss and closing at 15,782. This recovery was driven by several factors, including the steady stance of the People's Bank of China (PBoC) and a positive shift in German producer prices.
The PBoC demonstrated confidence in China's economy by maintaining its loan prime rates unchanged, a move widely anticipated by economists due to recent positive economic indicators from China.
German producer prices saw a 0.3% rise in August, contrasting with the 1.1% decline recorded in July. The increase suggests a strengthening demand environment that allows producers to raise contract prices.
The auto industry played a significant role in the market's recovery. Stocks of Porsche, BMW (ETR:BMWG), and Mercedes Benz (ETR:MBGn) Group rose by 2.78%, 2.64%, and 2.05% respectively, while Volkswagen (ETR:VOWG_p) and Continental also experienced gains. This positive trend was likely influenced by a 12.4% surge in German car registrations in August, rebounding from a significant 13.2% decrease in July.
In the banking sector, stocks were also on the rise with Commerzbank (ETR:CBKG) and Deutsche Bank gaining 1.59% and 0.97% respectively. Commerzbank's CFO projected a net interest of €8 billion for this year due to higher interest rates, suggesting a promising earnings outlook.
However, the market is bracing for potential swings as it navigates the hawkish stance of the US Federal Reserve (Fed). In response to the hawkish Fed-fueled growth in Treasury yields, US equities experienced a downturn with Dow falling by 0.22%, S&P 500 by 0.94%, and NASDAQ Composite Index by 1.53%.
Investors are also closely monitoring the upcoming speeches from ECB Executive Board member Isabel Schnabel and ECB President Christine Lagarde, which could potentially impact market dynamics.
Despite the potential downside risks posed by the hawkish mood of the Fed and ECB's concerns about inflation, improving macroeconomic conditions across the euro area could provide a buffer.
Technical indicators suggest a mixed picture for DAX, with bearish near-term but bullish longer-term price signals. The DAX is currently below the 50-day EMA but above the 200-day EMA. Future market movements could be influenced by factors such as US jobless claims and ECB commentary. If DAX breaks above the trend line, it could target the 50-day EMA and possibly reach 16,000. However, if it fails to break above, the 15,663 support level might come into play.
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