DAX starts week quietly as German trade surplus matches forecast

The DAX index has ticked upwards in the Monday session. Currently, the DAX is at 12,455, up 0.11% on the day. On the release front, Germany’s trade surplus widened to EUR 20.3 billion, matching the estimate. Eurozone Sentix Investor Confidence dropped to 12.1, but this beat the forecast of 9.0 points. ECB President Mario Draghi is testifying at the European Parliament Economic and Monetary Affairs Committee. On Tuesday, Germany and Eurozone ZEW Economic Sentiment are expected to post sharp declines.

German industrial numbers looked sharp last week. On Thursday, Factory Orders jumped 2.6%, marking a five-month high. This was followed by Industrial Production on Friday, which climbed 2.6%, its sharpest gain in 2018. There is growing concern that protectionist moves by both the U.S and the EU could take a toll on exports and the manufacturing sectors, so these strong readings are welcome news. Meanwhile, trade tensions between China and the U.S remain high as U.S tariffs on $34 billion in Chinese products took effect on Friday and China has vowed to retaliate against U.S imports. European officials are anxiously watching these developments, as Trump has threatened to impose tariffs of 20 percent on European auto imports if the EU does not remove their tariffs on U.S automobiles. The EU would clearly prefer not to engage in a full-blown tariff war with the United States and on Thursday, there was a report that European officials are examining the possibility of a tariff-cutting agreement between the world’s largest car exporters. Such a deal would be a major accomplishment and would likely boost European stock markets.

U.S employment data was a mix on Friday, as job growth remained above the 200-thousand level, but wage growth faltered. Nonfarm payrolls dropped to 213 thousand, but this beat the estimate of 195 thousand. Average Hourly Earnings edged lower to 0.2%, shy of the estimate of 0.3%. There was a surprise as the unemployment rate climbed to 4.0%, above the forecast of 3.8%. The data demonstrates that the U.S labor market remains strong, and the economy continues to perform well. The markets remain bullish on U.S growth, despite uncertainty in Europe and elsewhere, as well as the growing threat of an all-out trade war between the U.S and China.

  The trade war is finally upon us

  Wait-and-see as tariffs and payrolls loom

Economic Calendar

Monday (July 9)

  • 2:00 German Trade Balance. Estimate 20.3B. Actual 20.3B
  • 4:30 Eurozone Sentix Investor Confidence. Estimate 9.0. Actual 12.1
  • 9:00 ECB President Draghi Speaks
  • 11:00 ECB President Draghi Speaks

Tuesday (July 10)

  • 5:00 German ZEW Economic Sentiment. Estimate -17.9
  • 5:00 Eurozone ZEW Economic Sentiment. Estimate -13.2

*All release times are DST

*Key events are in bold

DAX, Monday, July 9 at 7:10 DST

Previous Close: 12,496 Open: 12,546 Low: 12,504 High: 12,558 Close: 12,510