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The German economy contracted by 0.1% in Q3 vs. forecasts of a 0.3% contraction. Softer-than-expected German inflation figures supported the appetite for DAX-listed stocks. In October, the German annual inflation rate softened from 4.5% to 3.8%. Economists forecast an inflation rate of 4.0%.
US economic indicators tested the appetite for riskier assets. However, easing fears of a regional Middle East conflict and a pullback in Treasury yields supported a rebound across the US equity markets. WTI crude and Brent tumbled by 3.78% and 2.84%, respectively, on containment of the Middle East conflict. Containment would limit the impact of the conflict on supply.
On Monday, the Dow gained 1.58%. The Nasdaq Composite Index and the S&P 500 ended the session up 1.16% and 1.20%.
The Monday Market Movers
Siemens Energy AG rallied by 12.66%, on German government support. Bank stocks also made gains on better-than-expected GDP numbers. Deutsche Bank and Commerzbank saw gains of 0.02% and 0.95%, respectively.
However, Infineon Tech and Sartorius AG were a drag on the DAX, sliding by 6.35% and 5.43%.
The auto sector also struggled. Mercedes Benz Group saw more losses after disappointing earnings results. Mercedes Benz Group and BMW declined by 1.12% and 0.88%, respectively. Porsche and Daimler Truck Holding saw losses of 0.73% and 0.40%, with Volkswagen falling by 0.15%.
Eurozone GDP and Inflation in the Spotlight
On Tuesday, German retail sales need consideration before the European opening bell. An unexpected fall in retail sales may raise bets on a prolonged German recession.
However, the Eurozone economy will also be in focus. GDP numbers for Q3 and October inflation figures will draw investor interest.
After market-friendly numbers from Germany on Monday, similar trends would support the appetite for DAX-listed stocks. Economists forecast the Eurozone economy to expand by 0.1% in Q3 vs. a 0.4% contraction in Q2.
However, economists forecast the Eurozone’s core annual inflation rate to soften from 4.5% to 4.2%. Softer inflation and better-than-expected GDP numbers would support riskier assets.
Away from the economic calendar, corporate earnings also need consideration. BASF is among the big names to release earnings results.
Earlier in the day, PMI numbers from China could set the tone. The NBS Manufacturing PMI fell from 50.2 to 49.5, with the Non-Manufacturing PMI down from 51.7 to 50.6.
US Consumer Confidence and Employment Costs in Focus
On Tuesday, US consumer confidence will be in the spotlight. A marked decline in consumer confidence would fuel bets on a slump in consumption, raising the threat of a hard landing. Economists forecast the CB Consumer Confidence Index to fall from 103 to 100. A drop below 100 would impact the appetite for riskier assets.
Employment costs for the third quarter also need consideration. An unexpected spike in employment costs could fuel demand-driven inflation, supporting a more hawkish Fed rate path. A more hawkish Fed rate path would weigh on riskier assets.
Other stats include house price figures and the Chicago PMI, which will likely play second fiddle to the key stats.
Beyond the economic calendar, the US earnings calendar will also move the dial. Pfizer Inc. and Caterpillar Inc. are among the big names releasing earnings on Tuesday.
The futures markets point to a mixed start to the Tuesday session. The DAX was up 23 points while the Nasdaq mini was down 52 points.
Short-Term Forecast
Eurozone GDP and inflation figures will be pivotal for the DAX ahead of the Fed interest rate decision. Better-than-expected GDP numbers and softer inflation figures could provide market relief. However, any cracks in the US economy could test the appetite for DAX-listed stocks.
DAX Technical Indicators
Daily Chart
The DAX remained below the 50-day and 200-day EMAs, affirming bearish price signals.
A DAX move through 14,800 would support a move toward the 14,957 resistance level. Softer Eurozone inflation figures and better-than-expected GDP numbers would support a DAX break above the 14,957 resistance level.
Eurozone GDP and inflation figures and US consumer confidence will be focal points.
A drop below the 14,575 support level would support a fall toward the 14,200 support level.
The 14-day RSI reading of 32.55 shows DAX on the border of oversold territory, suggesting improving buyer demand.
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