Top DAX Index news to watch this week: earnings, ECB, US-Iran war

The DAX Index has pulled back in the past few days, moving from this month's high of €24,800 to the current €24,128. It remains substantially higher than this month's low of €21,850. This article looks at the three main catalysts to watch this week.

Top DAX Index companies are releasing their earnings 

A major catalyst for the DAX Index is the upcoming German earnings season, which will provide more information about how companies performed in the first quarter of the year.

Financial results released so far show that most companies had a good start to the year. For example, according to FactSet, the average earnings by the 28% of the S&P 500 Index companies so far stands at 15%.

Many important companies in the DAX Index will release their numbers this month. Some of the most notable ones are Deutsche Boerse, Deutsche Bank, Mercedes-Benz, Adidas, Porsche, Deutsche Post, BASF, Volkswagen, Linde, Infineon.

Based on the recent earnings by the biggest US banks, chances are that Deutsche Bank will publish strong numbers because of its trading business, which has benefited from the ongoing Iran war.

Mercedes-Benz has already hinted that its numbers will be weak because of the soft Chinese and US businesses. The same is true with other automakers like Porsche and Volkswagen.

BASF stock price has soared this year as the company benefited from its manufacturing diversification to China, which helped it to offset the expensive German market. Adidas is also struggling as demand for its products wanes.

In line with this, the German stock market will react to the US big-tech earnings, which will provide information about the AI spending. These earnings are important as the top US companies releasing their earnings this week are worth more than the German stock market.

ECB interest rate decision 

The other key catalyst for the DAX Index is the upcoming European Central Bank decision that comes out on Thursday this week.

Economists polled by Reuters expect the bank to maintain the status quo by leaving interest rates unchanged. Officials will justify the move by arguing that more time will be needed to observe the impact of the ongoing Iran war on the economy.

The bond market is anticipating that the central bank will ultimately decide to hike interest rates later this year as inflation has jumped above its 2% target. Still, European’s interest rates are expected to remain lower than in the US in the near term.

The Federal Reserve, Bank of Japan, and the Bank of England will publish their numbers later this week.

US-Iran war progress 

Meanwhile, the stock market will also react to the upcoming US-Iran war as the open-ended ceasefire continues. The worst part about this ceasefire is that no talks are happening between the two countries, meaning that the war may restart soon.

This explains why energy prices continue rising this week, with the Brent and West Texas Intermediate rising to over $100. Such a move will hurt German companies as they normally depend on imported energy from the Middle East.

Signs that talks are restarting will be bullish for the German DAX as it will lead to lower energy prices in the near term.

DAX 40 Index technical analysis 

DAX Index chart | Source: TradingView 

The daily timeframe chart shows that the DAX Index peaked at €24,757 earlier this month and then pulled back to the current €24,128. It is hovering at the stroke pivot reverse level of the Murrey Math Lines tool.

The index has remained above the  50-day Exponential Moving Average (EMA). It has also formed an inverted head-and-shoulders pattern, which is a common bullish reversal sign in technical analysis.

Therefore, the most likely scenario is where it rebounds, potentially to the ultimate resistance at €25,000.