DAX Gains Ground on German, Eurozone Growth

The DAX index has posted losses in the Wednesday session. Currently, the index is trading at 12,277.50, up 0.67% since the Tuesday close. In Germany, Preliminary GDP slowed in the fourth quarter to 0.6%, but still matched the estimate. Final CPI declined 0.7%, also matching the forecast. Eurozone Flash GDP for Q4 remained steady at 0.6% for a third straight quarter, matching the estimate. In the US, the markets are expecting mixed inflation numbers. Core CPI is expected to expected to edge lower to 0.2%, while CPI is forecast to improve to 0.1%.

European markets have given a thumbs-up to German and Eurozone GDP reports. Both indicators showed respectable gains of 0.6% in the fourth quarter. On an annual basis, Eurozone GDP was up by 2.7%, underscoring the strong rebound in the eurozone economy in 2017. The DAX is marginally higher last week, after sliding 7.6% last week. In the banking sector, stocks are in green territory on Wednesday. Commerzbank has posted strong gains of 1.24%, and Deutsche Bank has gained 0.24%.

Investors across the globe, who endured a massive sell-off last week, will be keeping a close eye on US inflation indicators. Concern over higher inflation and additional rate hikes was a catalyst to the volatility in the stock markets, and any whiff of higher consumer inflation could again spook investors and send the markets into a tailspin. The new head of the Federal Reserve, Jerome Powell, sought to send a reassuring message on Tuesday, saying that the Fed is on alert to any risks to financial stability. However, it is clear that the Fed’s hand is limited when it comes to stock markets moves, and the volatility which we saw last week could resume at any time.

Economic Calendar

Wednesday (February 14)

  • 2:00 German Preliminary GDP. Estimate 0.6%. Actual 0.6%
  • 2:00 German Final CPI. Estimate -0.7%. Actual -0.7%
  • 3:00 German Buba President Weidmann Speaks
  • 5:00 Eurozone Flash GDP. Estimate 0.6%. Actual 0.6%
  • Tentative – German 30-year Bond Auction
  • 8:30 US CPI. Estimate 0.3%
  • 8:30 US Core CPI. Estimate 0.2%

Thursday (February 15)

  • 5:00 Eurozone Trade Balance. Estimate 22.4B

*All release times are EST

*Key events are in bold

DAX, Wednesday, February 14 at 6:35 EDT

Open: 12,315.50 High: 12,318.46 Low: 12,263.50 Close: 12,277.50

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

DAX Dips as Investors Still Skeptical

The DAX index has posted losses in the Tuesday session. Currently, the index is trading at 12,230.44, down 0.44% on the day. On the release front, there are no German or Eurozone indicators on the schedule for a second straight day.

US stock markets posted gains on Monday, raising hopes that last week’s correction is over. However, European investors appear to be more skeptical, as European markets are in red territory. The DAX has dropped 0.40% on Tuesday, erasing the gains from Monday. It’s been a rough February for investors, as the DAX has shed 7.6% since the start of the month. Investors will likely remain on the sidelines until there is stronger optimism that the massive sell-off is over.

German President Angela Merkel has reached an agreement with the socialist SDP to form a new government, but the price was steep, as the SDP extracted major concessions from Merkel, notably control of the powerful finance ministry. This will likely mark a shift in Germany’s eurozone policy, which had been marked by a conservative stance under former finance minister Wolfgang Schaeuble. The weaker members of the eurozone, such as Greece, will likely find a more sympathetic ear for financial help from the SDP than they did from Schauble. Many conservatives fear that the Olaf Scholz, who is expected to become finance minster, will not be as fiscally responsible as Schaeuble. On the weekend Scholz said that Germany should not dictate economic policies to other eurozone members. The coalition agreement still requires the consent of a majority of the 464,000 members of the SDP, and if the deal is rejected, Germany will likely be headed to new elections.

Economic Calendar

Tuesday (February 13)

  • There are no German or eurozone events

Wednesday (February 14)

  • 2:00 German Preliminary GDP. Estimate 0.6%
  • 2:00 German Final CPI. Estimate -0.7%
  • 3:00 German Buba President Weidmann Speaks
  • 5:00 Eurozone Flash GDP. Estimate 0.6%

*All release times are EST

*Key events are in bold

DAX, Tuesday, February 13 at 6:15 EDT

Open: 12,262.86 High: 12,298.96 Low: 12,1206.18 Close: 12,234.44

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

DAX Rebounds After Rough Week

The DAX index has started the week with gains in the Monday session. Currently, the index is trading at  12,303.00, up 1.63% since Friday’s close. On the release front, there are no German or Eurozone indicators on the schedule.

Global stock markets were turbulent last week, and the DAX suffered sharp losses of 4.6%. US markets ended the week with gains, and Asian and European markets have followed suit on Monday. On Thursday, the DAX dropped to its lowest level since early September. It’s been a rough February for the stock markets, and the DAX has shed 7.6% since the start of the month. Is the correction over? It’s too early too tell, since much of the sell-off is related to investor concerns over possible interest rate hikes by major central banks. The Bank of England has said it could accelerate its pace of hikes, and the Federal Reserve could follow suit if inflation moves higher.

German President Angela Merkel has reached an agreement with the socialist SDP to form a new government, but the price was steep, as the SDP extracted major concessions from Merkel, notably control of the powerful finance ministry. This will likely mark a shift in Germany’s eurozone policy, which had been marked by a conservative stance under former finance minister Wolfgang Schaeuble. The weaker members of the eurozone, such as Greece, will likely find a more sympathetic ear for financial help from the SDP than they did from Schauble. Many conservatives fear that the Olaf Scholz, who is expected to become finance minster, will not be as fiscally responsible as Schaeuble. On the weekend Scholz said that Germany should not dictate economic policies to other eurozone members. The coalition agreement still requires the consent of a majority of the 464,000 members of the SDP, and if the deal is rejected, Germany will likely be headed to new elections.

 

Economic Calendar

Monday (February 12)

  • There are no Eurozone or German events

*All release times are GMT

*Key events are in bold

DAX, Monday, February 12 at 7:10 EDT

Open: 12,224.60 High: 12,296.49 Low: 12,196.04 Close: 12,303.00

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

FX and Equities Brace for a Bumpy Week

Monday February 12: Five things the markets are talking about

Investors are bracing for another bumpy ride this week after market volatility has returned with a vengeance, delivering the biggest rout in global stocks in a number of years.

Despite stocks getting a reprieve overnight, investor fears of interest rate hikes that started the market correction continues to persist.

Last week, the CBOE volatility index ended almost three times higher than its Jan. 26 level. The ten-year Treasury yield finished last week atop of where they started at +2.85%.

Stateside, this week’s inflation report – U.S consumer-price data on Wednesday – could be the catalyst for a major struggle between equities and bonds that triggered the initial market turbulence.

Elsewhere, while the coming week is absent of G10 central bank meetings, there are a number of important economic indicators to be released. In the U.K, consumer and producer price indexes and retail sales for last month should be a challenge for the pound (£1.3560). While in Japan, its first estimate of Q4 growth along with last month’s producer price index and December’s machinery orders (a proxy for capital spending) should be capable of moving the yen (¥108.70).

Later today, President Trump will deliver his 2019 budget blueprint.

1. Stocks breath a ‘sigh of relief’

Global equities overnight have found some temporary support while volatility remains elevated.

Note: In Japan, equity markets were closed due to a bank holiday Feb. 12, while Chinese New-Year celebrations for the ‘Year of the Dog’ begin (Feb 15-21) and follow across much of Asia, including Hong Kong, Taiwan, Singapore, Malaysia and Indonesia.

Down-under, the Aussie S&P/ASX 200 was down -0.6%, weighed down by a fresh -1.6% drop in the energy sector, while in S. Korea, the Kospi rallied +0.4%.

China and Hong Kong stocks rebounded after last week’s aggressive sell-off. In China, the Shanghai Composite index was up +0.8%, while China’s blue-chip CSI300 index was up +1.3%. In Hong Kong, the Hang Seng Index was up +0.71%.

In Europe, regional indices are trading sharply higher across the board following on from a sharp rebound on Wall Street Friday and positive Asian markets.

U.S stocks are set to open deep in the ‘black (+1.2%).

Indices: Stoxx600 +1.5% at 374.1, FTSE +1.2% at 7181, DAX +1.9% at 12336, CAC-40 +1.5% at 5153, IBEX-35 +1.5% at 9785, FTSE MIB +1.1% at 22404, SMI +1.8% at 8831, S&P 500 Futures +1.2%

2. Oil prices rally +1%, gold higher

Oil prices start the week better bid, recovering some of this month’s steep losses as global equities find some firm footing after last week sea of red.

Brent crude futures are at +$63.54 per barrel, up +75c, or +1.2% from Friday’s close. U.S West Texas Intermediate (WTI) crude futures are at +$60.04 a barrel – that’s up +84c, or +1.4% from the close.

The stronger prices came after crude registered its biggest loss in two years last week as global stock markets slumped.

Nonetheless, rising U.S production continues to undermine the efforts led by the OPEC and Russia to tighten markets and prop up prices.

Note: U.S oil production has rallied above +10m bpd, overtaking top exporter Saudi Arabia and coming within reach of top producer Russia.

There are also strong signals the output will rally further. Data on Friday showed that U.S energy companies added 26 oilrigs looking for new production, boosting the count to +791, the highest since April 2015.

Ahead of the U.S open, gold prices have edged a tad higher as the dollar eased against G7 currency pairs after last week’s rally. Expect investors to take their cues from this weeks U.S inflation data. Spot gold is up +0.3% percent at +$1,320.19 an ounce.

Note: Prices touched their lowest since Jan. 4 at +$1,306.81 last week.

3. Sovereign yields creep higher

U.S and eurozone government bond yields have edged higher overnight, heading back towards multi-year highs on unease that a pick up in inflationary pressures globally and a strong domestic economy will encourage the ECB and the Fed to signal to be more aggressive than originally priced in at the beginning of the year.

In Europe, bond yields across the bloc were +1-2 bps higher in early trade, while in the U.S the 10-year note trades atop of its four-year highs.

In Germany, the 10-year Bund yield is up almost +2 bps at +0.77% and within sight of its nearly three-year high hit last week at around +0.81%. The yield on the U.S 10-year note has rallied +4 bps to +2.90%, the highest in more than four years, while in the U.K, the 10-year Gilt yield has gained +4 bps to +1.605%.

4. The U.S dollar’s quiet trading session

A broad-based flight to safe haven, such as U.S treasuries or the Japanese yen (¥108.70), has not happened to date despite the recent turmoil on equity markets.

The dollar ‘bulls’ are looking for the USD to rally this week, despite financial market volatility to remain high near-term as looser U.S fiscal policy and upside risk to U.S. inflation raises concerns.

Overnight, FX saw a quiet session ahead of some key inflation data this week (U.K Jan CPI Feb 13 and U.S Jan CPI on Feb 14).

Note: The recent pick up in global bond yields has been led stateside, while capital market wait for more details from President Trump’s budget and his infrastructure plan.

EUR/USD (€1.2272) is little changed, but holding below the psychological €1.23 handle. On the weekend, ECB’s Nowotny (Austria) reiterated the concerns about attempts by the U.S to politically influence the exchange rate.

GBP/USD (£1.3860) trades atop of Friday’s close despite the BoE having turned more rates ‘bullish’ last week. Dealers are now putting more weight on Brexit concerns as the U.K previously admitted that the growth potential of the economy had declined.

USD/JPY (¥108.70) is steady as Japanese markets were closed for a bank holiday.

5. Swiss inflation still super low

Data this morning showed that Swiss consumer prices slid -0.1% in January from December leaving the annual inflation rate at +0.7% and slightly below expectations.

Digging deeper, the decrease compared with the previous month is due in particular to the decrease in prices for outpatient hospital medical services. Prices for air transport also declined, along with prices for clothing and footwear, in particular because of sales. In contrast, prices for overnight stays in hotels, heating oil and electricity increased.

Inflation is still low despite the Swiss National Bank’s (SNB) efforts to raise it through negative interest rates and a willingness to intervene in currency markets.

Forex heatmap

DAX Slide Continues as US Markets See Red

The DAX index has posted sharp losses in the Friday session. Currently, the index is trading at 12,210.00, down 0.41% on the day. On the release front, there are no German or Eurozone indicators on the schedule.

Nervous investors continues to watch the massive sell-offs in the markets, and European markets have been following the downward trend in the North American and Asian sessions. It’s been a blue February for the DAX, which has plunged 7.8 percent. On Thursday, the DAX dropped to its lowest level since early September. Interestingly, the catalyst for the current turbulence has been solid economic data in the US, namely, improved payrolls and wage growth reports. This has raised concerns of inflation, which could lead to a quicker pace of rate hikes from the Federal Reserve. This sentiment has sent the bond markets higher, while weighing on global stock markets.

Hawks coming home to roost

It’s been a slow process, but Germany finally is on the verge of forming a new government. On Wednesday, the socialist SDP and Angela Merkel’s conservatives announced that they had finalized a coalition agreement. In the last government, the SDP was the junior partner of the conservatives, but this time around the SDP has extracted major concessions from Merkel, including the finance and foreign affairs ministries. This will likely mark a shift in Germany’s eurozone policy, which had been marked by a conservative stance under former finance minister Wolfgang Schaeuble. The weaker members of the eurozone, such as Greece, will likely find a more sympathetic ear for financial help from the SDP than they did from Schauble. The coalition agreement still requires the consent of a majority of the 464,000 members of the SDP, but is expected to pass this final hurdle.

Economic Calendar

Friday (February 9)

  • There are no German or eurozone events

DAX, Friday, February 9 at 5:35 EDT

Open: 12,224.60 High: 12,296.49 Low: 12,196.04 Close: 12,210.00

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US Stock Market Fall Sends DAX Lower

The DAX index has posted sharp losses in the Thursday session. Currently, the index is trading at 12,453.53, down 1.09% on the day. On the release front, Germany’s trade surplus narrowed to EUR 21.4 billion, just shy of the estimate of EUR 21.5 billion.

Global stock markets have shown strong volatility this week, and the DAX continues to see red. February has been awful, with the DAX shedding 5.9 percent. The week started with the Dow Jones posting its biggest one-day loss, and losses in US stock markets have pushed European markets lower. Earlier this week, the DAX dropped to its lowest level since early September. The catalyst for the current turbulence is investor concern that inflation could rise in the US, which in turn would trigger additional rate hikes from the Federal Reserve. This would make dollar-denominated assets more attractive and weigh on the European stock markets.

Market Jitters Remain/strong

After months of political uncertainty, Germany appears on the verge of forming a new government. On Wednesday, the socialist SDP and Angela Merkel’s conservatives announced that they had finalized a coalition agreement. In the last government, the SDP was the junior partner of the conservatives, but this time around the SDP has extracted major concessions from Merkel, notably control of the powerful finance ministry. This will likely mark a shift in Germany’s eurozone policy, which had been marked by a conservative stance under former finance minister Wolfgang Schaeuble. The weaker members of the eurozone, such as Greece, will likely find a more sympathetic ear for financial help from the SDP than they did from Schauble. The coalition agreement still requires the consent of a majority of the 464,000 members of the SDP, but is expected to pass this final hurdle.

 

Economic Calendar

Thursday (February 8)

  • 2:00 German Trade Balance. Estimate 21.5B. Actual 21.4B
  • 3:45 German Buba President Weidmann Speaks
  • 4:00 ECB Economic Bulletin

*All release times are GMT

*Key events are in bold

 

DAX, Thursday, February 8 at 6:15 EDT

Open: 12,490.50 High: 12,500.23 Low: 12,412.00 Close: 12,453.53

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

DAX Recovers After Falling to 5-Month Low

The DAX index has posted gains in the Wednesday session. Currently, the index is trading at 12,490.00, up 0.79% on the day. On the release front, German Industrial Production declined 0.6%, close to the estimate of -0.7%. This marked the third decline in four months. On Thursday, Germany releases Trade Balance.

It’s been a volatile week for global stock markets, and the DAX has not been immune. The index declined 4.2% last week, as a sharp decline in Deutsche Bank shares sent European stock markets lower on Friday. The slide continued this week, as strong US employment numbers raised concerns of higher inflation and additional rate hikes by the Federal Reserve. Higher US rates would be bad news for European stock markets, as investors would be attracted to dollar-denominated assets. US stock markets were in red territory on Monday, and the Dow Jones posted its biggest one-day loss ever. However, US stock markets rebounded on Tuesday and the trend has continued in the Asian and European markets on Wednesday.

Germany is close to a new government, as the socialist SDP and Angela Merkel’s conservatives are expected to announce an agreement later on Wednesday. Merkel has made major concessions in order to reach a deal, including giving the SDP the powerful finance ministry. This would likely mark a shift in Germany’s eurozone policy, which had been marked by a conservative stance under former finance minister Wolfgang Schaeuble. Members of the eurozone that have been struggling, such as Greece, will likely get a more sympathetic ear from the SDP than they did from Schauble. The coalition agreement still requires the consent of a majority of the 464,000 members of the SDP.

US Secretary of Treasury Says He is Closely Following Financial Markets

The German economy continues to shine, despite the ongoing coalition negotiations, which have dragged on since September. A spokesman for the SPD party, which is negotiating with Angela Merkel’s conservative bloc, said on Tuesday that a deal is “90-95%” done. For her part, Merkel has said that she is willing to make painful concessions in order to form a government. Both parties have stated that they want to reach an agreement on Tuesday. If there is an announcement later in the day, the euro could move higher.

 

Economic Calendar

Wednesday (February 7)

  • 2:00 German Industrial Production. Estimate -0.7%. Actual -0.6%
  • 5:33 German 10-year Bond Auction. Actual 0.69%
  • 6:30 EU Economic Forecasts

Thursday (February 8)

  • 2:00 German Trade Balance. Estimate 20.4B
  • 3:45 German Buba President Weidmann Speaks

*All release times are GMT

*Key events are in bold

 

DAX, Tuesday, February 7 at 7:45 EDT

Open: 12,490.50 High: 12,500.23 Low: 12,412.00 Close: 12,490.00

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

DAX Slides as US Stock Markets See Red

The DAX index continues to lose ground this week. In the Tuesday session, the index is trading at 12,454.51, down 1.88% on the day. On the release front, German Factory Orders impressed with a gain of 3.8%, crushing the estimate of 0.6%. On Wednesday, Germany releases Industrial Production.

The DAX ended last week with losses, as a sharp decline in Deutsche Bank shares sent European stock markets lower on Friday. The DAX declined 4.2% last week, and the slide continues, as the index has shed another 2.4% this week. The Dow Jones posted its biggest loss in one day on Monday, losing 1,500 points at one stage. The index ended the day down 4.6%, and the downward trend has continued in the Asian and European markets on Tuesday. What happened? Some analysts are pointing to the changing of the guard at the Federal Reserve, with Jerome Powell replacing outgoing chair Janet Yellen on Saturday. However, Powell is not expected to change current monetary policy, so it’s unclear how Powell would have rubbed the markets the wrong way before uttering a word as head of the Fed.

More likely, the stock markets woes can be attributed to strong US nonfarm payrolls and wage growth reports, which were released on Friday. Investors fear that the sharp data could lead to higher inflation, which in turn would result in more rate hikes this year. Higher interest rates make the dollar more attractive for investors, at the expense of the stock markets. Adding to investors’ concerns, there are expectations that the ECB and possibly the Bank of Japan could raise rates late in 2018, which would push up the euro and yen and weigh on the stock markets.

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The German economy continues to shine, despite the ongoing coalition negotiations, which have dragged on since September. A spokesman for the SPD party, which is negotiating with Angela Merkel’s conservative bloc, said on Tuesday that a deal is “90-95%” done. For her part, Merkel has said that she is willing to make painful concessions in order to form a government. Both parties have stated that they want to reach an agreement on Tuesday. If there is an announcement later in the day, the euro could move higher.

Economic Calendar

Tuesday (February 6)

  • 2:00 German Factory Orders. Estimate 0.6%. Actual 3.8%
  • 4:00 German Buba President Weidmann Speaks
  • 4:10 Eurozone Retail PMI

Wednesday (February 7)

  • 2:00 German Industrial Production. Estimate -0.4%

*All release times are GMT

*Key events are in bold

DAX, Tuesday, February 6 at 6:05 EDT

Open: 12,203.50 High: 12,483.29 Low: 12,190.19 Close: 12,451.50

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

DAX Drops to 17-Week Low, Eurozone Retail Sales Slide

The DAX remains under pressure, and has started the week with strong losses. In the Monday session, the index is trading at 12,659.00 down 0.98% since the Friday close. On the release front, Eurozone and German Services PMIs improved in January. Both readings beat their estimates. Eurozone retail sales declined 1.1%, matching the forecast. Later in the day, ECB President Mario Draghi testifies on the ECB’s Annual Report for 2016 before the European Parliament. On Tuesday, Germany releases Factory Orders.

It was a dismal week for the DAX, which slipped 4.3% last week. On Friday, Deutsche Bank shares dropped more than 5%, sending European stock markets into red territory, and the DAX is at its lowest level since September 26. The picture for Deutsche Bank is not a pretty one, as the stock price is at its lowest level since November, and the bank posted its third straight annual loss in 2017. A decline in investment bank revenue and the US tax reform bill contributed to a weak fourth quarter for Deutsche Bank shares.

With the eurozone economy continuing to perform well, there has been speculation that the ECB could wind up its asset-purchase program (QE) in September and shift to a normative policy, and perhaps raise interest rates. However, Mario Draghi and other ECB members have taken pains to reiterate that the Bank is in no rush to end QE. Last week, executive board member Benoit Coeure joined the chorus, saying that although QE “will not last forever” policymakers were in agreement “that we have to be patient and prudent because we are not yet where we want to be in terms of inflation”. Investors would be well advised to keep a close eye on eurozone and German inflation numbers, as asset purchases could be extended beyond September if inflation remains well below the ECB target of around 2.0%.

Economic Calendar

Monday (February 5)

  • 3:55 German Services PMI. Estimate 57.0. Actual 57.3
  • 4:00 Eurozone Final Services PMI. Estimate 57.6. Actual 58.0
  • 4:30 Eurozone Sentix Investor Confidence. Estimate 33.2. Actual 31.9
  • 5:00 Eurozone Retail Sales. Estimate -1.1%. Actual -1.1%
  • 9:45 Eurozone Final Services. Estimate 53.3
  • 11:00 ECB President Mario Draghi Speaks

Tuesday (February 6)

  • 2:00 German Factory Orders. Estimate 0.6%
  • 4:00 German Buba President Weidmann Speaks

*All release times are GMT

*Key events are in bold

 

DAX, Monday, February 5 at 7:15 EDT

Open: 12,665.04 High: 12,751.83 Low: 12,621.85 Close: 12,659.00

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.