DAX index analysis ahead of BMW, Lufthansa, Volkswagen earnings

The DAX index has remained in a consolidation phase since May as investors eye the next actions by the European Central Bank (ECB) and corporate earnings. It was trading at €18,400 on Monday, down from the year-to-date high of €18,800.

Top German earnings season ahead

The DAX index has reacted mildly to the recent corporate earnings by some of its biggest constituent companies. 

Deutsche Bank’s stock price retreated to €14.32, much lower than the year-to-date high of €16.52. This retreat after the company reported a profit before tax of €2.4 billion in the first half of the year. It also reported a net revenue of €15.4 billion, up by 2% from the same period in 2023.

However, the company made huge provisions worth €1.3 billion to deal with the litigation of its Postbank acquisition. 

Looking ahead, several DAX index companies will publish their financial results this week. Adidas, one of the biggest constituents will release its results on Wednesday. 

These numbers will come at a difficult time for the industry as evidenced by the recent Nike earnings and the ongoing Lululemon stock plunge. There are signs that the industry is slowing while competition is rising. 

Nike’s shares dropped by over 42% from its highest point in 2023 while Lululemon has slumped by 50% from its highest point this year. On the other hand, newer competitors like On Holding is hovering near its all-time high. 

Therefore, this week’s earnings will provide more colour about its business and whether it is doing well in a tough environment. 

The other top DAX index company to watch will be Lufthansa, the biggest German airline. Lufthansa stock price has dipped by over 44% from its highest point in 2023 as the industry has continued worsening. 

Most global airline companies have dropped sharply in the past few months as the industry has slowed. Companies like Delta Air Lines and Ryanair have published weak results recently. Therefore, its numbers will provide more information about the aviation industry in Europe.

DAX automakers earnings

Meanwhile, Volkswagen, the biggest automaker, will also publish its financial results this week. Its stock has dropped by over 12% below the highest level this year. The most likely scenario is where its stock retreats after earnings.

Most recently, companies like Stellantis and Ford have tanked after publishing weak results. A key challenge for these companies is that their electric vehicles are not doing well. 

BMW, another big automaker will publish its earnings on Thursday. These numbers will come at a time when the stock has moved into a bear market after falling by 20% from its highest point this year. It has also formed a double-top pattern at €106. In most cases, this is one of the most bearish signs, especially now that it is trading at the neckline at €86.58.

Daimler Trucks, one of the biggest trucking companies, will also release its results. In my last article on Daimler, its stock was flying high as demand accelerated. Now, the stock has tumbled by over 21% from its highest point this year as demand started to wane. 

The other top companies that will publish their results this week will be Heidelberg Cement, Deutsche Post, and Merck. 

More DAX index companies will publish their quarterly results next week. Bayer, a highly troubled company, will release its results on Tuesday. These numbers will show whether its turnaround efforts are working. 

Uniper, the giant German energy company, Beiersdorf, Commerzbank, Continental, Siemens AG, Deutsche Telekom, Munich Re, and Rheinmetall will release their results. Rheinmetal, a company in the millitary industrial complex, has been the best-performing company in the index this year. 

Meanwhile, like the CAC 40 index, the DAX will react to the upcoming Magnificent 7 earnings. Companies like Meta Platforms, Amazon, Microsoft, and Amazon will publish their numbers this week.

As we saw last week when Google and Tesla released, these stocks have an impact on American and global stocks. Last week, most companies in Europe dropped after the two earnings. 

The actions by the Federal Reserve will also have an impact on the DAX 40 index. It will do well if it hints that it will start cutting rates.

DAX index forecast

The daly chart reveals that the DAX 40 index has held steady in the past few weeks. It has remained inside the rectangle channel shown in blue. The index has also formed a bullish flag pattern, a popular bullish sign. 

It has remained above the 50-day and 100-day moving averages. Therefore, the most likely scenario is that the index remains in this consolidation phase and then stages a strong comeback in the next few weeks. This view will be confirmed if the stock rises above the upper side of the flag pattern at €18,880. Such a move will open the possibility of it rising to €20,000.