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German Greens Party official Hasselman updated developments on March 13, reportedly stating no progress in talks with Conservatives/SPD on debt plans.
Mario Cavaggioni, portfolio manager at HY Market, noted:
“Market don’t care, parties involved in tough talks before reach an agreement seems the main scenario. Bund again trying to break 2.9% level, my target remains 3%.”
On German bond yields, Cavaggioni added:
“I think that 3% could be reached in the short term, in a long horizon agree that sustained yields above actual levels require a GDP growth (that will happen only in 2026 if fiscal boost is delivered) and/or inflation scare backdrop…”
Increasing opposition against the coalition government’s fiscal package could impact German-listed stocks. Sensitive sectors to the fiscal stimulus plan include construction, defense, energy, telecommunications, IT, and tech.
Germany’s Bund 10-year Yield could be a gauge of fiscal policy sentiment. The 10-year German Bund yield closed the Thursday session at 2.85%.
US Markets Slide as Trump Triggers Flight to Safety
The Nasdaq Composite Index slid by 1.96% on March 13, while the Dow and the S&P 500 dropped 1.30% and 1.39%, respectively. Trump’s threat of 200% tariffs on EU wines and spirits fueled safe-haven demand, driving gold to a record high of $2,989.
Rising bets on a June Fed rate cut, following softer producer prices and a higher jobless claims 4-week average, failed to cushion the downside.
Michigan Consumer Sentiment to Influence Recession Concerns
While Germany’s fiscal policy and tariff developments dominate market focus, US consumer sentiment could also impact risk sentiment on Friday, March 14. Economists expect the Michigan Consumer Sentiment Index to fall from 64.7 in February to 63.1 in March. Weaker sentiment could signal a pullback in consumer spending that contributes over 60% to US GDP.
However, stronger sentiment could shift focus to inflation expectations. Rising inflation expectations may signal a more hawkish Fed rate path, tempering bets on a June Fed rate cut. In this scenario, rising borrowing costs could put pressure on risk assets.
Near-Term Outlook: Key Drivers
The DAX’s near-term outlook hinges on:
- German fiscal policy: progress: Any advancements in fiscal rule changes and infrastructure funding.
- Trade tensions – The escalation of US-EU and US-China trade disputes.
- University of Michigan Survey of Consumers – Trends in consumer sentiment and inflation expectations.
Potential DAX Scenarios:
- Bullish Case: Easing trade tensions, fiscal stimulus progress, and dovish central bank policies could drive the DAX toward the record high of 23,476.
- Bearish Case: Fiscal stimulus resistance, escalating trade risks, or stronger consumer sentiment or inflation expectations could drag the DAX toward 22,000.
As of Friday morning, the DAX futures were up 121 points, while the Nasdaq 100 mini gained 190 points, signaling a positive session ahead.
DAX Technical Indicators
Daily Chart:
Despite Thursday’s pullback, the DAX remains above the 50-day and 200-day Exponential Moving Averages (EMAs). However, tariff and fiscal-fueled volatility suggests potential short-term downside risks within the broader uptrend.
A breakout from 22,500 would signal a move toward 22,750. A break above 22,750 could enable the bulls to target 23,000.
Conversely, if the DAX breaks below 22,350, it may test support at 22,000 and the 50-day EMA.
With the RSI at 52.48, the DAX sits below overbought levels (above 70), suggesting room for a climb to its all-time high of 23,476.
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