DAX Holds Above 24,000; Fed Policy Uncertainty Weighs on Markets

US Political & Policy

• Trump to address nation Wednesday 21:00 EST (02:00 GMT Thursday); focus: accomplishments, future plans, possible new-year policy teasers.
• US threatens retaliation against EU digital tax; may impose fees and restrict foreign services.
• Trump expected to sign executive order this week to fast-track cannabis reclassification (NBC News).

US Equities

• Mixed session: Nasdaq slightly higher, S&P 500 and Dow lower.
• Drivers:
  • Choppy trade after delayed US data.
  • November payrolls: +64K, unemployment 4.6% (up from 4.4%); participation rate rose.
  • October payrolls revised: -105K (vs exp. -25K).
  • Retail sales flat; weakness in autos; PMIs disappointed.
• Sector performance:
  • Energy: -3%, oil at lowest since 2021.
  • Healthcare: down after Pfizer 2026 outlook warning; Humana flagged management changes.
• Rates: Market pricing 58bps cuts in 2026 vs Fed signal of 25bps → policy uncertainty persists.

Global Markets

• Asia: Nikkei rebounded on tech gains; caution ahead of BoJ hike and 2026 guidance.
• UK: Inflation fell to 3.2% (Nov) from 3.6%; strengthens expectations for BoE rate cut this week.

Europe

• Bank stocks:
  • STOXX 600 Banks Index trades at 1.17x book value (40% below 2007 peak; below US at 1.7x).
  • Sector up 60% in 2025; AI-driven efficiency and strong earnings outlook.
  • Analysts raised profit forecasts sharply; loan growth near highs since mid-2023.
  • Expected shareholder returns: 20–25% of market cap via dividends/buybacks over 3 years.
• Eurozone PMIs:
  • Composite: 51.9 (prev. 52.8).
  • Germany: 51.5 (lowest in 4 months).
  • Services weakened; manufacturing flat; costs rising.
  • Q4 growth outlook weak; hopes pinned on fiscal stimulus in 2026.

Germany – DAX – 1 D

The Germany 40 remains in a broad consolidation range between 23,000 and 24,800, with the current price at 24,133.5 after a modest gain of 0.10%. Key resistance is located at 24,804, while immediate support sits at 23,786, and long-term structural support is near 22,800. The recent rally from November lows has stalled below resistance, suggesting that upside momentum is capped unless a breakout occurs. Price action reflects a neutral to mildly bullish bias, but the inability to clear the upper boundary signals potential for short-term retracement toward 24,000 or 23,786.

Momentum indicators show mixed signals. The MACD histogram remains positive with signal lines above zero, indicating bullish momentum, though flattening suggests a slowdown. The Stochastic RSI is near 66 and trending down from overbought territory, pointing to possible cooling in the near term. Overall, the market outlook hinges on whether price can break above 24,804 to confirm trend continuation or fails, triggering a pullback within the established range.

US Labor & Retail

• Mixed signals:
  • Oct: -105K jobs.
  • Nov: +64K jobs; unemployment 4.6% (highest since 2021).
  • Retail sales flat; control group +0.8% (double expectations).
• Shutdown distortions persist; clarity expected with December data.
• Market reaction muted; USD at lowest since September.

Core Themes

• US policy uncertainty (Fed leadership, rate path).
• Structural changes: extended trading hours (NASDAQ/NYSE Arca), cannabis reclassification.
• Global divergence: Eurozone slowdown vs Japan resilience; UK inflation easing.
• Equity rotation: tech fatigue, healthcare weakness, energy slump.
• Elevated volatility risk from conflicting macro signals.

-Philip Papageorgiou – Market Analyst
--X ex Twitter: PhilipForexCom