Market outlook: “DAX remains in consolidation mode for the time being”

The DAX's all-time high was followed by profit-taking. At the start of the new week, however, things are looking up again. The charts therefore continue to show a green light for the time being. The start of the reporting season in the USA will be exciting this week.

7 October 2024 FRANKFURT (Frankfurt Stock Exchange). “The record sentiment on the stock markets has evaporated for the time being,” states Helaba in its current weekly outlook. According to the report, the conflict in the Middle East has led to increasing risk aversion on the financial markets. After reaching a new record high of 19,492 points at the end of the previous week, the DAX fell back below 19,000 points at times over the past few days. The countermovement on Friday ultimately reduced the weekly loss to 1.8%. Compared to the closing price of 19,120 points, German blue chips started trading this morning at 19,150 points.

Recession in the USA becomes less likely 

The major US indices closed well up on Friday following strong US labor market data. “This report should ease concerns that the US economy is facing a recession,” argue analysts at Commerzbank. The reaction to the figures can be seen as a clear sign that the current focus is clearly on the economic outlook and less on interest rate policy. NordLB points out that the labor market data “speaks against very offensive further interest rate cuts by the Fed”. A few weeks ago, this would probably have led to falling share prices.

In Germany, the crisis in the automotive industry is the main issue. According to Helaba, the EU tariffs on Chinese e-cars decided on Friday come “at an inopportune time” for the already ailing industry. The analysts base their assessment on the fact that German manufacturers that produce in China are also affected. Moreover, because the latest sentiment indicators such as the ifo business climate “do not signal an imminent turnaround”, the “troubled times for the DAX are unlikely to be over yet”.

First quarterly figures in focus

With the start of the last quarter of the year, corporate figures will once again take center stage in the coming weeks. In the US, the reporting season kicks off on Tuesday with the results of beverage manufacturer Pepsi. The first heavyweights from the banking sector, Wells Fargo and JPMorgan, will report at the end of the week. Expectations could not be more different in the run-up. While the analysts at LBBW generally describe the earnings expectations for US blue chips as “quite ambitious”, Deka believes that the divergence between the recent increase in Q3 growth forecasts and the simultaneous significant fall in analysts' earnings estimates could enable companies to “clearly exceed their forecasts”.

However, in view of the record index levels and the upcoming US elections, the price reactions could still be rather restrained according to the Deka forecast. LBBW also points to the seasonal peculiarity that October has often shown its weaker side in years with US presidential elections. “The associated uncertainty weighed on share price prospects”. This can be seen very clearly in the Q4 balance sheet for these years, which, despite the “typical” year-end rally, was significantly weaker than in years without an election (up 7.1%) with an average gain of just 2.8% for the S&P 500.

Technical picture for the DAX (still) bullish

Jörg Scherer from HSBC points out in his current DAX analysis this morning that the leading German share index started October with a red weekly candle, as it had done in the two previous months. However, this comes as no surprise after the new all-time high and is therefore only a typical “breather” so far. As long as the “horizontal support at around 19,000 points” is not significantly undercut, the technical analyst sees good opportunities for “price quotations beyond the 20,000 point mark”. For this to happen, however, the current consolidation pattern would have to be broken upwards.

Important economic and business events of the week

Monday, 7 October

10.30 am. Eurozone: Sentix economic index. According to Deka, the “bad news from the automotive industry and downward revisions to economic forecasts” are also likely to have left their mark on the mood of financial market analysts: In the sentix economic index for October, the economists therefore expect a further decline to minus 16.

Tuesday, 8 October

8.00 am: Germany: Industrial production. After the unexpectedly sharp decline in July, Deka expects a “restrained countermovement” (plus 0.4 percent) upwards in the August figures for the manufacturing industry. The early factory vacations in the automotive industry are likely to have had a noticeable effect.

Wednesday, 9 October

8 pm. USA: Minutes of the last Fed meeting. In the upcoming report, Commerzbank analysts are looking above all “at the Fed's willingness to follow up the latest rate cut of 50 basis points at the beginning of November with another one of a similar magnitude”.

Thursday, 10 October

2:30 pm. USA: Consumer prices. In what Deutsche Bank says is the most important data release of the current week, its US economists expect medium-term price growth to slow, with the overall index seen at +0.05 percent versus +0.2 percent in August and the core index at +0.24 percent (up from 0.3 percent).

Friday, 11 October

4 pm. USA: Consumer confidence. According to Deka, the consumer confidence index of the University of Michigan should be supported by the lower interest rate environment. Economists expect a value of 72.0, while the consensus is only 70.0.

By Thomas Koch, 7 October 2024, © Deutsche Börse AG