European Equites Gain with German Dax Recovering from Prior Slump

German Dax Outlook:

• The German Dax 40 retests psychological resistance as industrials lead gains.
• Dax price index recovers from mild slump after market participants reprice in hawkish ECB.
• Corporate earnings remain in sight for large German corporations, posing an additional threat to price action.

What’s Driving the German Dax?

Over the past week, inflation data and rate expectations have remained at the forefront of risk sentiment, adding pressure to stocks. With the Core inflation rate in the Euro area rising to a fresh record high of 5.6%, market participants shifted their focus to the ECB (European Central Bank) and the hawkish repricing of higher rates.

After commentary from ECB president Christine Lagarde confirmed that rates would only decrease once the inflation target of 2% is in sight, Dax prices fell slightly before rebounding off support at 15323.

German Dax Technical Analysis

At the time of writing, Dax prices have returned to psychological resistance at 15500, after a mild setback earlier this week. While the economic calendar continues to contribute to price action, the 20-day MA (moving average) has come in as additional support at 15435.

Dax 40 Price Index – Daily Chart

Chart prepared by Tammy Da Costa using TradingView

As all sectors move into positive territory, the industrial sector has been leading gains, bolstered by higher demand for materials and the reopening of China’s economy.

Refinitiv

While positive earnings from Convestro AG and expected job cuts from Zalando SE have assisted in driving recent price action, next week’s corporate earnings could provide an additional catalyst for the major European index.

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German Corporate Earnings Week Ahead

Source: Refinitiv

Dax Price (Futures) Levels

--- Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707