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US Markets Rise on Fed Optimism
US equity markets advanced on April 11 after softer-than-expected producer prices supported expectations of a June Fed rate cut. The Nasdaq Composite Index rallied 2.06%, while the Dow and the S&P 500 gained 1.56% and 1.81%, respectively.
US producer prices rose 2.7% year-on-year in March, down from 3.2% in February. As a leading inflation indicator, the reading indicated an easing demand environment. Weakening demand may dampen inflationary pressures, supporting a more dovish Fed rate path.
However, consumer sentiment and inflation expectations capped Friday’s gains. The Michigan Consumer Sentiment Index fell from 57.0 in March to 50.8 in April. Meanwhile, inflation expectations surged to 6.7%, up from 5% in March.
EU-US Trade Talks Take Center Stage
On Monday, April 14, all eyes will be on EU-US trade negotiations. EU Trade Commissioner Maros Sefcovic will reportedly meet with US officials. Early developments could influence German-listed stocks, particularly if talks stall.
While US-EU trade talks are crucial, investors must monitor US-China trade headlines.
On April 11, the US government lowered tariffs on selected computers and laptops, routers, and smartphones from China to 20%, raising hopes of a softer stance on China. However, President Trump warned of upcoming tariffs on semiconductors and all electronics in a shift from reciprocal to national security tariffs.
Despite the prospect of fresh tariffs, Asian markets responded positively to the news. The tariff news set the DAX up for a Monday, April 14, rebound.
Near-Term Outlook: DAX Sensitivity to Macro Risks
The DAX’s near-term trajectory hinges on trade developments, inflation trends, and central bank commentary.
Potential DAX Scenarios:
- Bullish Case: Favorable US-EU trade talks, softer inflation, or dovish central bank rhetoric could drive the DAX toward 21,000.
- Bearish Case: Renewed trade tensions, higher inflation, weak US data, or hawkish central bank commentary may drag the DAX toward the April 7 low of 18,490.
As of Monday morning, the DAX futures were up 446 points, while the Nasdaq 100 mini gained 248 points, indicating a positive start to the session.
Technical Warning Signs Flash
Daily Chart:
Despite Friday’s losses, the DAX trades above the 200-day Exponential Moving Average (EMA) while remaining below the 50-day EMA, suggesting near-term downside risks.
- Upside Target: A break above 20,500 could enable the bulls to target 21,750. A sustained move above 21,750 would open the path to the 50-day EMA.
- Downside risk: A drop below the 200-day EMA may signal a return to sub-20,000 levels.
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