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US Markets Rebound as Fed Rate Expectations Shift
US equity markets rallied on Friday, February 28, as focus shifted from Trump’s tariff threats to the Fed’s rate outlook. The Nasdaq Composite Index and the S&P 500 gained 1.63% and 1.59%, respectively, while the Dow rose 1.39%.
According to the CME FedWatch Tool, the probability of a June Fed rate cut rose from 69.9% to 80.4% on February 28, reinforcing bullish sentiment across risk assets.
Key Economic Data Ahead: US Manufacturing PMI in Focus
On March 3, the ISM Manufacturing PMI will give investors insights into the demand environment. Economists expect the PMI to slip from 50.9 in January to 50.8 in February.
A lower-than-expected PMI reading could spark fears of an economic slowdown, supporting a more dovish Fed rate path. Rising bets on multiple Fed rate cuts may drive demand for German-listed stocks. However, a higher PMI could signal a less dovish Fed rate path, potentially pressuring the DAX.
Beyond the data, US tariff developments will remain a key driver of sentiment. Rising EU-US tensions could overshadow economic indicators.
Near-Term Outlook
The DAX’s near-term direction hinges on:
- German fiscal policy: Progress on a defense fund and stimulus measures could support the index.
- Trade tensions – Escalating US-EU and US-China trade disputes may create downside risks.
- Inflation trends – Eurozone inflation data will play a crucial role in influencing the ECB’s rate path.
A combination of fiscal stimulus, easing trade tensions, and dovish central bank signals could push the DAX toward 22,750. However, resistance to loosening Germany’s debt brake, escalating trade risks, and hawkish policy decisions could send the index lower toward 22,000.
As of Monday morning, the DAX mini was up 124 points, signaling a positive start to the week. Manufacturing sector data from China and Beijing’s stimulus pledges set the tone for the European session. Meanwhile, the Nasdaq 100 mini dropped 7 points.
DAX Technical Indicators
Daily Chart:
After last week’s gains, the DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs). However, tariff-fueled volatility suggests potential short-term downside risks within the broader uptrend.
A return to 22,750 could enable the bulls to target the February 19 record high of 22,935 next. If the DAX breaks above 22,935, 23,000 would be the next major resistance level.
Conversely, if the DAX drops below 22,500, 22,150 and the 50-day EMA will be the next key support levels.
With the RSI at 62.98, the DAX remains below overbought levels (above 70), potentially allowing a move toward the 22,935 high.
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