DAX Extends Gains Above 24,000; Fed Cut Odds at 84%

Federal Reserve Outlook

• Sharp internal split ahead of this week’s meeting; Powell’s tone and dissent count seen as critical.
• Markets price in 84% chance of a 25bp cut, despite some policymakers opposing easing and analysts warning risk of no move is underpriced.
• Data gaps due to 43-day shutdown: no updated unemployment rate; JOLTS on Tuesday gains importance.
• Powell’s message expected to drive markets more than the rate decision itself; focus on inflation vs. employment balance and committee division.
• Global backdrop: European and Asian markets subdued; China’s export beat offers support; Japan’s Nikkei pressured by tech valuation concerns.
• Other central banks: SNB, BoC, RBA expected to hold; speculation over Powell’s successor adds uncertainty for long-dated US yields.

 

Germany – IMF Productivity Warning

• IMF urges Germany to use fiscal space from debt brake reform for infrastructure, digitalization, innovation.
• Productivity growth weak: TFP up 4.4% in 10 years vs. 9% in US.
• Debt ratio projected at ~68% by 2027, below G7 average; key risk is funds diverted to consumption instead of productivity-enhancing investment.

 

Germany 40 (DAX) Technical Analysis 1 Day Chart

Germany 40 has extended its bullish momentum, now trading at 24,050 after a strong breakout above the 23,740 pivot level. Price action confirms a continuation of the rebound from the 22,900 support zone, and the current structure is approaching the upper half of the consolidation range between 22,900 and 24,884. The breakout above 24,000 is technically significant because it shifts short-term sentiment toward bullish, with the next resistance target at 24,200 and the major cap at 24,884. Sustained closes above 24,000 would strengthen the case for a retest of the range high, while failure to hold this level risks a pullback toward 23,740, which now acts as support.

Momentum indicators confirm improving strength. MACD is positive and widening, signaling strong bullish momentum, while RSI at 56.68 is above neutral but still far from overbought, leaving room for further upside. ATR at 301.5 indicates volatility remains elevated, consistent with the sharp upward move. The technical outlook favors continuation toward 24,200–24,400 if price holds above 24,000; otherwise, a rejection could trigger consolidation or a retracement toward 23,740 before the next directional move.

 

Sweden – Pension Model

• Sweden combines pay-as-you-go base pension with funded premium pension via AP7 fund.
• AP7 delivered ~14% annual return over 10 years; overall pension capital equals ~140% of GDP vs. <10% in Germany.
• Lesson for Germany: more capital-funded savings could improve sustainability; MSCI World historical real return ~11% vs. inflation ~2.2%.

 

Japan – Fiscal Stimulus & Corporate Reform

• Fiscal package €120B (~3.4% of GDP) plus defense spending increase to 2% of GDP.
• Investments targeted at AI, energy, shipbuilding, critical minerals; tax cuts and subsidies to boost domestic demand.
• Corporate reforms: unwind cross-shareholdings, divest low-margin units, redeploy capital for higher dividends, buybacks, growth investments.
• Nearly half of TOPIX firms trade below book value; reforms aim to lift ROE >10%.
• Forecast: 2026 earnings +13%, P/E ~15, recent revisions +2% signal improving sentiment.

 

Upcoming Events

• Tuesday, Dec 9: Gamestop (GME) earnings, Thyssenkrupp (TKA) earnings, JOLTs Job numbers
• Wednesday Dec 10: FED Interest Rate Decision, FOMC economic Projections
• Friday Dec 12: Germany Inflation rate

 

Philip Papageorgiou – Market Analyst
X ex Twitter: PhilipForexCom