DAX Index at risk amid fragile ceasefire as Mercedes-Benz sales plunge

The DAX Index pulled back by over 1.37% on Thursday, erasing some of the gains made a day earlier. It dropped to €23,755 from this week's high of €24,140. This retreated as the US-Iran ceasefire stalled and as Mercedes published weak results.

US-Iran ceasefire and Mercedes-Benz deliveries 

The German DAX 40 Index retreated, mirroring the performance of other European indices like CAC 40, FTSE 100, and IBEX 40.

This retreat happened as concerns rose amid the ongoing risk that the ceasefire between the US and Iran will not hold, especially because of Israel. Israel has continued to bomb Lebanon, while Iran has continued to shut the Strait of Hormuz.

In a Truth Social post, Trump maintained that the US military will remain in the region until a deal is reached. 

Also, most analysts believe that the ceasefire will not last, which explains why crude oil prices continued rising on Thursday, with the West Texas Intermediate (WTI) nearing $100.

Germany is highly exposed to the soaring energy prices because it imports all its energy. Most of its oil and gas comes from the Middle East, where supply has largely dried.

Soaring energy prices have affected the German industrial sector, with top companies like BASF shifting their manufacturing base to China.

Meanwhile, the DAX Index dropped as automakers continued struggling. A report by Mercedes-Benz showed that its sales dropped in the first quarter, led by China.

Its sales dropped by 6% to 499,700 in Q1, with sales in China falling by 27%. This weakness is notable as it was worse than the 19% it experienced in the previous one.

Mercedes-Benz and other top European automakers are struggling in China, where local brands like Nio, Li Auto, BYD, and XPeng have continued to gain market share.

At the same time, the company faced a challenge in the United States, where Donald Trump imposed large tariffs against foreign imports.

As a result, the Mercedes-Benz stock price dropped by 2.2% after its delivery numbers. Volkswagen and Daimler Truck stocks fell by over 2.54% and 2.2%. Some of the other top laggards in the index were firms like SAP, Rheinmetall, GEA Group, Airbus, and Adidas.

DAX Index technical analysis 

DAX Index chart - Source: TradingView

The three-day chart shows that the DAX 40 Index jumped on Wednesday as global stocks jumped after the ceasefire between the US and Iran.

This rebound was short-lived as it dropped to €23,795. It is now attempting to fill the gap that formed on Wednesday. It remains below the 100-day Exponential Moving Average (EMA).

The Supertrend indicator remains in the red, while the The Relative Strength Index (RSI) has turned around and moved from 60 to 54. 

Therefore, the index may continue falling in the near term as sellers target the next key target being at €23,000. It will eventually rebound after a full commitment to end the war. If this happens, it will rebound to the key resistance level at €25,000.