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DAX hits highest since June on better economic sentiment

The DAX was able to draw upon some better-than-expected Ifo survey results today and cross over the psychologically-important 14,500 mark, reaching a fresh 5-month high.

From a technical perspective however, the DAX could be ripe for a immediate-term pullback.

Its 14-day relative strength index has, for the past couple of weeks, stayed above the 70 threshold. which denotes overbought conditions.

DAX hits highest since June on better economic sentiment

The Ifo survey is often regarded as one of the best forward indicators of Germany’s economic growth. And the November figures came in better-than-expected:

  • Business climate: 86.3 vs. 84.0 median estimate
  • Current assessment: 93.1 vs. 93.9 median estimate
  • Expectations: 80.0 vs. 77.0 median estimate


However, for proper context, the 80 figure for forward expectations are still a far cry from the near-103 print registered back in mid-2021.

They are still languishing around their lowest since the onset of the 2020 pandemic, although they have been recovering since September’s 75.2 print.

After all, Germany is likely already going through a recession now, as record-high inflation buffets consumers, while the threat of an energy crisis still looms as winter progresses.

In order for Germany’s benchmark stock index to carve out more gains, it may need to see further recovery in the economic data due out tomorrow (Friday, Nov 25) as well:

  • December consumer confidence (forecasted -39.6, vs. November’s -41.9)
  • 3Q private consumption (forecasted 0.3% vs. 2Q’s 0.8%)
  • Government spending (forecasted 0.8% vs. 2Q’s 2.3%)
  • Capital investment (forecasted -0.6% vs. 2Q’s -1.3%)
  • 3Q GDP final print (0.3%, set to confirm late-October’s preliminary 3Q GDP print)

While there may be greenshoots of a turnaround in consumer confidence readings, with tomorrow’s GDP data also likely confirming the positive surprise that Germany managed to escape a recession in 3Q, there are still major headwinds and risks that the Eurozone has to contend with.

The positive data surprises of late do not mean all is well in Europe’s largest economy.

With all that in mind, it remains to be seen whether Friday’s economic data releases would be enough to help DAX keep its head above the 14,500 line by the weekend.

Overall, European stocks, as is the case with global equities, remains beholden to broader market sentiment which is still contending with uncertainties surrounding inflation and central bank policy tightening, all while a global recession looms for 2023.



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