Inflation and Fed Hawkishness Drag DAX Below 24,700 in Broad Selloff

German stocks suffer worst session in weeks as May CPI at 2.6% and Fed Chair Warsh’s rate-hike signal push DAX below key support, triggering defensive rotation.

German equities suffered their worst session in weeks as a one-two punch of domestic inflation data and a hawkish signal from the new Federal Reserve chief slammed the DAX below a key psychological threshold. The benchmark closed Friday at 24,671 points, down 1.29% on the day and breaching the 24,700 level that had acted as a floor in recent weeks.

The selloff was triggered by two conflicting but equally damaging headwinds. Early Friday, figures showed German consumer prices rose 2.6% in May, driven largely by climbing energy costs. The reading dashed hopes that the European Central Bank would move swiftly to ease monetary policy. Hours later, Fed Chairman Kevin Warsh, speaking in Washington, delivered an unequivocal rejection of rate-cut speculation, declaring price stability his overriding priority. Markets interpreted the remarks as opening the door to further rate increases this year.

Defensive rotation accelerates as cyclicals crumble

Institutional investors responded by reshuffling portfolios in classic risk-off fashion. Money rotated into defensive consumer staples and utilities: Beiersdorf climbed nearly 2% to lead the winners, while SAP, Henkel, and E.ON all posted solid gains. The utility sector’s resilience and a surprising stand from Commerzbank — buoyed by persistent speculation about UniCredit’s strategic interest — provided a rare bright spot.

The opposite side of the trade was brutal. Zalando cratered 5.75%, the session’s steepest loss, as prolonged elevated interest rates hammered its valuation model. Siemens Energy shed a similar magnitude, with more than €350 million in shares changing hands. Infineon slid sharply under the weight of weak tech readings from Wall Street, and auto heavyweights BMW and Volkswagen failed to escape the downdraft.

Technicals flash warning signs

The index closed just above its 50-day moving average, which currently sits at 24,603 points — a near-perfect match with Friday’s intraday low. That level now becomes the immediate battleground. Should it break on Monday, chartists see a fast slide toward the 24,000 round number. The relative strength index has dropped to 48, indicating fading momentum without yet reaching oversold territory. Further down, the longer-term trendline near 24,278 looms as a more consequential support.

The DAX’s year-to-date gain has been whittled to a razor-thin 0.54%. With US inflation data due next week poised to reset rate expectations, the coming days will test whether the index can hold its precarious footing or whether the correction accelerates into a deeper retreat.