DAX Index forecast ahead of Volkswagen, BMW, Porsche earnings

The DAX Index made a big down gap this week as the war in Iran pushed European gas prices up sharply. It plunged to a low of €23,637 on Monday, its lowest level since December last year. It has now plunged by over 7.4% from its highest point this year as focus shifted to the upcoming earnings by some of the top companies.

German stocks retreated amid the ongoing war in Iran

Germany and other European countries have become some of the most affected in the ongoing war in Iran, mostly because of energy costs.

Brent, the global benchmark, jumped to $84, its highest level in months and double digits above the lowest level this year.

Most notably, the Double Title Transfer Facility gas benchmark has soared by double digits in the past few days, moving to a high of 50 EUR/MWh. 

These numbers mean that European inflation, which had moved below the European Central Bank’s target of 2.0%, will start going back up, raising the possibility of higher interest rates in the region.

Higher energy prices will make some of the top German manufacturers highly uncompetitive, especially at a time when Chinese brands like BYD and Nio are gaining market share in the region.

The DAX Index also retreated as some of the top companies published their results. Bayer, a top player in the pharmaceutical industry, published weak results, with its net losses widening. The stock did well as the company reached a $7.25 billion Roundup settlement.

Deutsche Post, another top company, published encouraging results and hinted that its business will continue doing well despite the ongoing challenging market. It also boosted its share repurchase program.

Looking ahead, as the earnings season comes to an end, some major companies will publish their results next week. Volkswagen Group, the country's biggest automaker, will release its numbers onTuesday, while BMW will release its on Friday. 

Rheinmetall, the biggest defense contractor in the country, will release its numbers on Wednesday. These results will likely show that its revenue and backlog continued growing in the fourth quarter as governments boosted their spending.

Porsche, Henkel, and Brenntag will release their results on Wednesday, while RWE and Hannover Rueck will release on Thursday.

Porsche shares will be in the spotlight as it has become one of the top laggards in Europe because of the weakness in the Chinese and US markets.

DAX Index technical analysis 

The daily chart shows that the DAX Index crashed from a high of €25,490 in January to the current €23,815. It formed a big gap on Monday as the market opened.

It moved below the important support level at €24,263, the neckline of the double-top pattern at €25,490. Also, the stock moved below the 50-day moving average.

Therefore, the index will likely continue falling as sellers target the next key target at €22,927, its lowest level in November last year. 

However, there is a likelihood that the index will rebound if there are signs that the war is ending.