While a slower contraction across the private sector may offer market relief, price trends could be crucial. Rising input and output prices could support the ECB’s signals to pause rate cuts, potentially pressuring the DAX. Conversely, softer prices may raise expectations of rate cuts and lift demand for DAX-listed stocks.
Wall Street Mixed as US Attack Fears Resurface
US markets had a mixed end to the week. On June 20, the Nasdaq Composite Index and S&P 500 dropped 0.51% and 0.22%, respectively, while the Dow edged up 0.08%.
Uncertainty about Trump’s plans to greenlight an attack on Iran left investors cautious going into the weekend.
US Services Sector in the Spotlight
Later in the June 23 session, US private sector PMI data could influence the Fed rate path and risk appetite. Given the services sector accounts for around 80% of the US economy, the Services PMI should have more weightage.
Economists expect the S&P Global Services PMI to drop from 53.7 in May to 52.9 in June. While the headline PMI will influence sentiment, investors must also consider sub-components, including price and job creation trends. Softer prices and falling staff levels may revive bets on a Q3 Fed rate cut. However, rising prices and a stable labor market could align with Fed Chair Powell’s wait-and-see stance.
Outlook: Key Catalysts for the DAX
The DAX’s near-term outlook depends on Iran-Israel conflict-related news, trade developments, PMI numbers, and ECB commentary.
Bullish Case: Easing US-EU trade tensions, progress toward a ceasefire, softer PMI prices, and dovish central bank signals could send the DAX toward 23,500.
Bearish Case: Iran closes Strait of Hormuz, escalation in US-EU trade tensions, weak PMI data, or hawkish central bank cues may drag the DAX toward 23,000.
At the time of writing on June 23, the DAX futures dropped 126 points, while the Nasdaq 100 was down 115 points. The Futures markets signaled a choppy start to the week.
Despite offering a two-week window on June 20, President Trump ordered strikes over the weekend after diplomatic efforts failed. On June 21, Trump announced:
“We have completed our very successful attack on the three Nuclear sites in Iran, including Fordow, Natanz, and Esfahan. All planes are now outside of Iran airspace. A full payload of BOMBS was dropped on the primary site, Fordow.”
Trump also warned that any retaliation would be met with greater force. Crude oil prices will likely be the gauge for market trends. A surge in oil prices may impact risk assets. WTI Crude Oil prices rose 2.28% to $75.235 in early trading. Iran’s next move will be crucial after parliament approved to close the Strait of Hormuz.
Technical Setup Suggests Cautious Optimism
After Friday’s gains, the DAX sits above the 50-day and 200-day Exponential Moving Averages (EMA), signaling bullish momentum.
Upside Target: A breakout above 23,500 may pave the way to retesting last week’s high of 23,712. A sustained move through 23,712 could bring 24,000 into view.
Downside risk: A drop below the 50-day EMA would expose the crucial 23,000 support level.
The 14-day Relative Strength Index (RSI), at 44.70, suggests the DAX could drop below 23,000 before entering oversold territory (RSI< 30).
