DAX 30: Softer Despite Better Than Expected Caixin China PMI
German DAX has stabilised after being lower by 0.75% this morning and the price trading near last week’s low of 10,680. For now, the short-term trend is bullish, but a break of last week’s low may trigger a decline to 10,500, which is a 50% correction on the ECB QE-fuelled rally from the week before.
We note that the S&P 500 and FTSE 100 closed bearish on Friday of last week. In the case of the FTSE 100, it tried to trade higher over and over again, but buyers were not ready to lift it as commodity prices were soft.
Data overnight as official China PMI printed 49.8, missing its expectation of a 50 print, while Caixin China PMI printed 48.3 vs. the 47.6 expected. This outcome is not only better than expected, but we can clearly see a low in the series, suggesting Chinese economic growth may improve in the coming months ahead. The markets prefer to focus on Caixin China PMI over the official PMI figure.
U.S. ISM Manufacturing May Slip Below 50
U.S. ISM manufacturing this afternoon will be key for DAX traders. The market expects an outcome of 50 from 50.2 in September. If this print holds, the stock markets should be upbeat and we may avoid a further decline on the DAX. However, our own estimations point towards a bigger drop and it would not surprise us if the ISM declines below 49. This would suggest that the U.S. manufacturing sector is contracting, suggesting a softer 4Q GDP growth and lower corporate earnings. U.S. Construction spending is also on tap, as well as the second reading of Markit U.S. Mfg. PMI.
Upcoming Risk Events (GMT)
- 09:00 Markit Eurozone Manufacturing PMI, est. 52
- 09:30 Markit UK PMI Manufacturing SA, est. 51.3
- 14:45 Markit US Manufacturing PMI, est.54
- 15:00 Construction Spending MoM, est.0.5%
- 15:00 ISM Manufacturing, est. 50
- See Economic Calendar
DAX 30: Short-Term Trend Remains Bullish Above 10,680
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
--- Written by Alejandro Zambrano, Market Analyst
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