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DAX rises despite recession worries rising

• AI optimism boosted Wall Street
• German industrial production falls -0.7% MoM vs -0.4% prev.
• DAX looks to test resistance at 16800

The DAX, along with its European peers, is rising, tracking gains in the US overnight as the tech sector soared on AI hype. The Nasdaq rallied 2.4% as tech stocks surged on renewed optimism over artificial intelligence.

The DAX is extending gains for a second day despite ongoing recession concerns, which could limit the upside.

Data today show that German industrial output disappointed in November, with a downward trend continuing, raising the possibility that the economy has entered a technical recession.

German industrial production fell for six straight months, dropping 0.7% after falling 0.3% in October. Putting this into perspective, industrial production is now more than 9% below its pre-pandemic level, around four years since the start of Covid.

The outlook for the German industry provides a few reasons to be optimistic. Meanwhile, data last week also showed that consumers were struggling as retail sales in Germany tumbled by 2.5% MoM.

However, it hasn't all been bad news, and exports came in stronger than expected, showing some signs of life. Still, this is unlikely to be sufficient to help the economy avoid any technical recession in Q4, the first since 2020.
 

DAX forecast – technical forecast

After recovering from the 16440 hit on Friday, the DAX needs to rise above 16800, yesterday’s high, to extend gains towards 17000, the all-time high.

Should sellers successfully defend 16800, bears could push the price back to test 16440, with a break below here creating a lower low.

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Oil falls towards $70 as demand worries overshadow supply concerns

• Saudi cut its official sell price to Asian importers to a 27-month low
• API data in focus ahead of US CPI and China data later this week
• Oil holds above 70.00

Oil prices have stabilized after dropping over 4% in the previous session as concerns over slowing demand overshadowed geopolitical tensions in the Middle East.

Oil prices plunged at the start of the week after Saudi Arabia slashed its official selling price to Asian importers to a 27-month low, suggesting a deteriorating demand outlook for China, the major player in the region.

The move also comes as non-OPEC producers gained market share at a time when OPEC has been cutting supply to the market.

Still, the downside is likely to be limited amid ongoing concerns of Middle Eastern supply disruptions as the Israel Hamas continues.

Looking ahead, API oil inventory data is due later today. There are also several key economic readings this week that could influence the price of oil, including US inflation data on Thursday, Chinese inflation, and trade data on Friday, which could provide more clues about the health of the economy of the world’s largest oil importer.
 

Oil forecast – technical analysis

Oil faced rejection at the falling trendline dating back to late September, rebounding lower. The price is consolidating around 71.00. Sellers will need to take out 70.00, the round number, in order to bring 67.00 into focus, the May and June lows. A break below here would be significant.

On the upside, a recovery would need buyers to retake 72.40 the November low and 73.50 the falling trendline. A rise above here brings 75.00 round number and 76.20 the December high into focus.

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