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8 Jan 2024

German DAX leads the pack as European stocks close higher on Monday

  • European equities saw gains to kick off the new trading week.
  • Risk appetite recovering on the new week despite macro headwinds.
  • German economy continues to lag in step with broader Eurozone economic conditions.

The German DAX led the charge in European equities on Monday, as investors bid up stocks and saw a healthy rebound in risk appetite after 2024 kicked things off with a retreat in market sentiment.

European economic figures on Monday were broadly better than expected as investor optimism carefully threads the needle on a positive outlook on data. Eurozone Retail Sales for the year through November declined less than expected, falling 1.1% versus the forecast 1.5% decline, compared to October’s YoY figure of -0.8% (revised upwards from -1.2%).

The Eurozone Sentix Investor Confidence index for January rebounded from -16.8 to -15.8, while the Eurozone Consumer Confidence survey index unexpectedly rose from -15.1 to -15.0, versus the market forecast for a steady hold at -15.1.

Eurozone Retail Sales for November also slid exactly as much as investors were expecting, printing at -0.3% compared to October’s print of 0.4% (revised upwards from 0.1%).

Structural economic issues continue to loom over the domestic German economy, with an aging population set to worsen an already-steep labor shortage, and the International Monetary Fund is projecting that Germany will be the only G7 country to see real economic decline in 2023.

Germany’s government budget for 2024 was rejected by Germany’s own top court last November, and Germany is scrambling to find a stopgap for a projected 17 billion Euro funding deficit for 2024.

Despite economic concerns swirling around the Eurozone’s single largest economy, European investors found reasons to buy on Monday, sending the German DAX higher by 122 points to close at €16,716.47, gaining nearly three-quarters of a percent. France’s CAC 40 index also closed up at €7,450, climbing 0.4% and gaining almost 30 points.

The Eurostoxx 600 major index also climbed around 0.4% to close up 1.8 points at €478.18. The London FTSE equity index climbed a little under five points to close at £7,694.20, a scant 0.06% higher.

DAX Technical Outlook

The German DAX etched in a third straight gain on Monday, keeping the equity index on the high end after hitting an all-time high of €16,984.44 in December.

The DAX’s current bull run kicked off from a six-month low of €14,618.09, climbing over 16% bottom-to-top.

The DAX is trading into lofty chart territory well above the 200-day Simple Moving Average (SMA) near €15,800, and a bullish crossover by the 50-day SMA is accelerating technical support at the €16,000 major handle.

DAX Daily Chart

DAX Technical Outlook

 

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