DAX Clears Key Hurdle, Shifts Focus to Corporate Earnings and ECB

Germany's DAX index surged above its 200-day moving average after oil prices fell. Focus now shifts to corporate earnings and ECB policy for future direction.

A sharp drop in oil prices, triggered by the provisional reopening of the Strait of Hormuz, propelled Germany's DAX index to a powerful weekly gain. The benchmark surged 2.27% on Friday to close at 24,702 points, securing its third consecutive weekly advance with a total gain of 3.77%. This rally has pushed the index comfortably above its 200-day moving average, a key technical level watched by investors.

The easing of Middle East tensions provided a clear tailwind, reversing pressure on oil-sensitive DAX heavyweights in the chemical and automotive sectors. For the year, the index is now back in positive territory, showing a modest gain of 0.66%. This marks a significant recovery from April's volatility, which saw the market briefly dip below 19,000 points amid threats of US tariffs before rebounding sharply when those duties were suspended.

Technical and Seasonal Backdrop Improves

From a chart perspective, the outlook has brightened considerably. The index has built a structure of higher lows since its multi-month low in late March, with buy signals from the 20, 50, and 200-day moving averages now active. Bollinger Bands are widening, suggesting room for further upward movement. The immediate technical hurdle is the daily high from March 2nd at 24,892 points. A decisive break above this resistance could open the path toward the 52-week high of 25,420 points.

Historically, the period from mid-April to early June has been favorable for German equities. Over the past decade, the DAX has posted gains in this window every single year, with an average return of around six percent.

Earnings and Central Bank Policy Take the Wheel

With geopolitics receding, the market's focus shifts decisively to corporate fundamentals and monetary policy. A dense calendar of quarterly reports begins this week, featuring major index constituents. SAP, with a market capitalization of approximately €167 billion and a DAX weighting of nearly 15%, is a critical bellwether. Its results on April 23rd have the potential to move the entire market.

They will be followed by reports from Deutsche Bank on April 29th and Siemens and Mercedes-Benz later in the week. Concurrently, economic data will provide context, starting with the Hannover Messe industrial trade fair on April 21st, followed by the key Ifo Business Climate index on April 25th.

All eyes will then turn to the European Central Bank. The ECB is expected to hold its deposit rate at 2.00% at its April 30th meeting, but its updated economic projections are crucial. The bank now forecasts 2026 inflation at 2.6% alongside meager growth of just 0.9%, a combination that pushes the prospect of rate cuts further into the future. Money markets are currently pricing in one to two rate hikes by the end of the year, and the ECB's communication could solidify or alter these expectations.

Whether the positive seasonal pattern holds this year will likely be determined by the collective message from corporate boardrooms and the signal sent by the ECB at month's end.