Yesterday, the DAX did reach a new intraday record high but subsequently retreated. Given the importance of the futures market for many institutional investors, skepticism about the genuine buy signal triggered by this event is warranted. The DAX futures contract has yet to recapture its all-time high from May 29.
Without such a new record high, the chart looks somewhat disappointing: since early May, the market has been trapped in a sideways trading range of 1,000 points, hitting the upper boundary yesterday. The lack of a clear direction explains why skepticism remains prevalent regarding the legitimacy of yesterday’s record.
Wall Street lost momentum yesterday after economic data highlighted a concerning trend for investors. The figures indicated a weakening labor market coupled with rising prices, creating a predicament where the Federal Reserve should ideally lower interest rates to support the labor market. However, they find themselves unable to do so due to the rising inflation constraints.
Even with President Trump’s pressure on Fed Chairman Powell, the Federal Reserve has a dual mandate, requiring it to pay equal attention to both the labor market and inflation. Investors can only hope that the impending official labor market data on Friday will not confirm this troubling trend. Otherwise, it could lead to significant sell-offs on Wall Street, which would likely impact the DAX as well.
Comment provided by Jochen Stanzl, Chief Market Analyst at CMC Markets
