The German DAX Index futures jumped by nearly 1% on Monday morning as investors reacted to the upcoming earnings and the US-EU trade deal announced on Sunday. It jumped to €24,555, much higher than Friday’s close of €24,217.
EU and US trade deal
The main catalyst for the DAX Index on Monday morning was the latest trade deal between the US and Germany. In a statement after meeting Ursula von der Leyen, Trump said that most goods shipped to the US from the EU will attract a 15% tariff.
These tariffs will apply to many popular items like vehicles. However, the statement added that steel and aluminum tariffs will remain at 25%. As a result, the effective US tariff on EU goods stands at about 16%. The EU also committed to making significant investments in the United States and increasing its energy supply.
The new trade deal helped to prevent an escalation of the trade war on August 1, when the US would have placed a 30% tariff on European goods. Most importantly, the EU had prepared a list of goods worth over €100 billion to subject to tariffs.
The deal came a few days after the European Central Bank (ECB) left interest rates unchanged in its July meeting. Analysts at Goldman Sachs and BNP Paribas now believe that the bank has completed its rate cuts for this year.
Top Germany earnings ahead
The next key catalyst for the DAX Index will be the upcoming German earnings, which will provide more information about the second quarter and the impact of tariffs on German companies.
Automakers like Mercedes-Benz, BMW, and Porsche will be the ones to watch as they publish their earnings this week. These firms will provide more details on what to expect with US tariffs at 15%.
Porsche stock price will be watched more closely because the US is its only growing make. China, Germany, and the rest of Europe continued to deteriorate in the first quarter.
It is also more exposed because, unlike BMW and Mercedes-Benz, it manufactures all its vehicles in Germany. This means that all its vehicles will be subject to a 15% tariff.
The other notable DAX constituent to watch will be Adidas as it publishes its earnings. Adidas share price has plunged by 23% from its highest level this year as its business faces challenges. These results will provide more details on whether the business was growing.
The other companies to watch include Siemens Healthineers, BASF, HeidelbergCement, Covestro, Lufthansa, Linde, and Daimler Truck. Additionally, the index will react to the US earnings season as companies like Microsoft, Apple, and Meta Platforms.
DAX Index technical analysis
The daily chart shows that the German DAX Index jumped after the US-EU trade deal. It has formed an inverse head-and-shoulders pattern, a popular bullish reversal pattern.
It has moved above the 100-day and 50-day Exponential Moving Averages (EMA), a popular bullish reversal pattern. Therefore, the index will continue rising as bulls target the key resistance level at €25,000. A drop below the 50-day moving average at €23,800 will invalidate the bullish view.
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