As we embark on 2025, the initial performance of the US equity markets signals challenges ahead. Notably, indices like the Nasdaq Composite, S&P 500, and Dow Jones all faced losses, dropping by 0.16%, 0.22%, and 0.36% respectively. Investor sentiment is currently marred by underlying concerns regarding the implications of former President Trump’s economic policies, particularly their potential to exacerbate inflation and influence the trajectory of Federal Reserve interest rates. This climate of uncertainty underscores the fragility of the market as we transition into the new year.
The emphasis now shifts towards crucial economic indicators, particularly the ISM Manufacturing PMI report expected to be released on Friday. This index serves as a vital barometer for gauging manufacturing sector health and overall economic demand. Analysts are watching closely, with projections suggesting the PMI will hold steady at 48.4 for December. A decline below this threshold would suggest waning demand and could trigger further bearish sentiment in the markets. This potential downturn, especially when combined with threats of tariffs on US exports, could particularly burden export-driven stocks in the DAX.
For the DAX index, fluctuations in US data—coupled with ongoing tariff apprehensions—will be significant determining factors. Should the ISM manufacturing index indicate stronger demand, bouncing above the neutral 50 mark, it could rally the DAX towards its historic peak of 20,523. Conversely, a dip in US PMI data or persistent tariff threats could push the DAX lower, with 19,750 as a critical support threshold. Interestingly, futures trading presented a mixed outlook on Friday morning, with DAX futures reflecting a slight decrease while Nasdaq-mini futures showed modest gains.
Currently, the DAX maintains positions above its 50-day and 200-day Exponential Moving Averages (EMAs), which generally signals overall bullish market conditions. If the index manages to reclaim levels around 20,350, bullish traders may set their sights on the previous high of 20,523, with further ascents anticipated towards 21,000 should this level hold. On the flip side, the technical setup indicates that if DAX descends beneath 19,750, the 50-day EMA would gain heightened significance, suggesting renewed downward pressure may be imminent.
Attention will also be drawn to geopolitical developments, particularly those pertaining to China’s stimulus efforts and overall trade relations, which heavily influence both US and European markets. These external factors, combined with domestic economic indicators and central bank communications, will play pivotal roles in shaping the DAX’s performance in the immediate future.
As we navigate through these uncertain economic waters, investors remain vigilant, aware that volatility could prevail, paving the way for both challenges and opportunities in early 2025.