DAX slips as markets eye EU-US trade talks

The DAX index has lost ground in the Wednesday session. Currently, the DAX is at 12,627, down 0.50% on the day. On the release front, German Ifo Business Climate ticked lower to 101.7, just above the estimate of 101.6 points. On Thursday, Germany releases GfK Consumer Climate and the ECB will set its minimum bid rate.

Tit-for-tat tariffs between the U.S and the EU has seen the trade relationship between them reach a low point. More tariffs could be coming, as the EU has vowed to impose $20 billion in tariffs on U.S products if the Trump administration slaps $50 billion on European goods. Will the nasty trade war worsen or will the sides pull back? There could be important developments on Wednesday, as an EU delegation led by European Commission President John-Claude Juckner meets with President Trump at the White House on Wednesday. If the sides can make progress on car tariffs, automaker shares could jump and boost the DAX.

With the global tariff war threatening to hurt German and eurozone exports, investors have been keeping a close eye on manufacturing data. There was positive news on Tuesday, as Eurozone and German manufacturing PMIs continue to point to expansion. The German release improved to 57.3, easily beating the estimate of 55.5, while the eurozone reading of 55.1 was above the forecast of 54.7. Both indicators had dropped over six consecutive months and the July releases put an end to that nasty streak.  Services PMIs were not as strong, as the German and eurozone releases missed their estimates.

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Economic Calendar

Wednesday (July 25)

  • 4:00 German Ifo Business Climate. Estimate 101.6. Actual 101.7
  • 4:00 Eurozone Money Supply. Estimate 4.0%. Actual 4.4%
  • 4:00 Eurozone Private Loans. Estimate 3.0%. Actual 2.9%

Thursday (July 26)

  • 2:00 German GfK Consumer Climate. Estimate 10.7
  • 7:45 ECB Main Refinancing Rate. Estimate 0.00%
  • 8:30 ECB Press Conference

*All release times are DST

*Key events are in bold

DAX, Wednesday, July 25 at 6:55 DST

Previous Close: 12,689 Open: 12,678 Low: 12,623 High: 12,693 Close: 12,627

DAX jumps as bank, automaker shares sparkle

The DAX index has posted sharp gains in the Tuesday session. Currently, the DAX is at 12,715, up 1.33% on the day. On the release front, German and Eurozone manufacturing PMIs beat expectations, but services PMIs missed their forecasts. On Wednesday, German Ifo Business Climate is expected to dip to 101.6 points.

The EU and U.S have slapped tariffs on each other and a recent NATO summit exposed the frosty relations between President Trump and EU leaders. Still, there could be better news ahead, as EU President Jean-Paul Juckner meets with President Trump on Wednesday. If the talks show some progress, European equity markets could continue to move upwards. The DAX is up sharply on Tuesday, boosted by bank and automaker shares. Commerzbank has jumped 3.20%, Daimler is up 2.57%, BMW has climbed 2.07% and Volkswagen has risen 3.26%.

Eurozone and German manufacturing PMIs continue to point to expansion. The German release improved to 57.3, easily beating the estimate of 55.5, while the eurozone reading of 55.1 was above the forecast of 54.7. Both indicators had dropped over six consecutive months and the July releases put an end to that nasty streak. With the tariff war threatening to hurt German and eurozone exports, investors have been keeping a close eye on manufacturing data. Services PMIs were not as strong, as the German and eurozone releases missed their estimates.

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Economic Calendar

Tuesday (July 24)

  • 3:30 German Flash Manufacturing PMI. Estimate 55.5. Actual 57.3
  • 3:30 German Flash Services PMI. Estimate 54.6. Actual 54.4
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 54.7. Actual 55.1
  • 4:00 Eurozone Flash Services PMI. Estimate 55.0. Actual 54.4

Wednesday (July 25)

  • 4:00 German Ifo Business Climate. Estimate 101.6

*All release times are DST

*Key events are in bold

 

DAX, Tuesday, July 25 at 6:55 DST

Previous Close: 12,548 Open: 12,601 Low: 12,583 High: 12,746 Close: 12,715

DAX under pressure after Trump threatens currency war

The DAX index has posted losses in the Monday session. Currently, the DAX is at 12,510, down 0.41% on the day. On the release front, there are no key German or eurozone indicators. Eurozone Consumer Confidence, which hasn’t posted gains since January, is expected to dip to -1 point. On Tuesday, Germany and the eurozone will release service and manufacturing PMIs.

President Trump made waves on Friday, after attacking the Federal Reserve’s monetary policy and also taking shots at the EU. Trump criticized the EU and China for manipulating their currencies and keeping interest rates lower. The escalating trade war, which started with Trump slapping tariffs on China, the EU and other trading partners, has weighed on global equity markets. Investors now have a new concern, which is that Trump could once again show that he is not afraid to lock horns with the EU and China, and the result could be a global currency war.

Investors are keeping a close eye on the June service manufacturing PMIs for Germany and the eurozone, which will be released on Tuesday. The manufacturing PMIs have weakened for six straight months – will this continue in June? Although the PMIs continue to show expansion in Germany and the eurozone, the markets remain nervous that the escalating trade war is having a negative impact on the manufacturing sector. If the readings continue to head lower on Tuesday, European equity markets could respond with losses.

After years of monetary stimulus to boost the eurozone economy, the ECB is close to phasing out its asset-purchase program. The ECB plans to trim its monthly purchases from EUR 30 billion to 15 billion in September and wind up the program in December. Is a rate hike next on the menu? Any clues of a change in monetary policy are bound to affect the euro, as the ECB has not raised rates since 2011. Many analysts are predicting a rate hike in the second half of 2019. However, growing global trade tensions could put a wrinkle in plans to raise rates. The European Commission and the International Monetary Fund have lowered 2018 growth forecasts for the eurozone and for Germany. If the tariff slugfest continues, the markets could lose ground.

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Economic Calendar

Monday (July 23)

  • 6:00 German Buba Monthly Report
  • 10:00 Eurozone Consumer Confidence. Estimate -1

Tuesday (July 24)

  • 3:30 German Flash Manufacturing PMI. Estimate 55.5
  • 3:30 German Flash Services PMI. Estimate 54.6
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 54.7
  • 4:00 Eurozone Flash Services PMI. Estimate 55.0

*All release times are DST

*Key events are in bold

DAX, Friday, July 23 at 6:50 DST

Previous Close: 12,561 Open: 12,519 Low: 12,488 High: 12,564 Close: 12,510

DAX trading sideways as investors look for cues

The DAX index is almost unchanged in the Friday session. Currently, the DAX is at 12,679, down 0.06% on the day. On the release front, German PPI dipped to 0.3%, matching the estimate. The eurozone current account surplus dropped sharply to 22.4 billion. This was well short of the forecast of 27.2 billion and the lowest surplus since June 2017.

After years of monetary stimulus to boost the eurozone economy, the ECB is close to phasing out its asset-purchase program. The ECB plans to trim its monthly purchases from EUR 30 billion to 15 billion in September and wind up the program in December. Is a rate hike next on the menu? Any clues of a change in monetary policy are bound to affect the euro, as the ECB has not raised rates since 2011. Many analysts are predicting a rate hike in the second half of 2019. However, growing global trade tensions could put a wrinkle in plans to raise rates. The European Commission and the International Monetary Fund have lowered 2018 growth forecasts for the eurozone and for Germany. If the tariff slugfest continues, the euro will likely continue to lose ground.

The eurozone economy is in good shape and stronger growth has resulted in higher inflation levels. In June, euorozone CPI improved to 2.0%, reaching this symbolic level for the first time since February 2017. On an annualized basis, Final CPI also came in at 2.0%. If inflation levels continue to rise, there will be pressure on the ECB to consider raising interest rates, although this is an unlikely scenario before next year. The DAX has enjoyed a strong July, posting gains of 4.3%.

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Economic Calendar

Friday (July 20)

  • 2:00 German PPI. Estimate 0.3%. Actual 0.3%
  • 4:00 Eurozone Current Account. Estimate 27.2B. Actual 22.4B

*All release times are DST

*Key events are in bold

 

DAX, Friday, July 20 at 5:10 DST

Previous Close: 12,686 Open: 12,662 Low: 12,638 High: 12,697 Close: 12,685

DAX takes pause from recent gains

The DAX index has posted losses in the Thursday session. Currently, the DAX is at 12,715 down 0.39% on the day. Still, the DAX is in green territory this week, with gains of 1.4 percent. On the release front, there are no major German or eurozone events. On Friday, German PPI is expected to dip to 0.3% and the eurozone current account surplus is forecast to narrow to EUR 27.2 billion.

Eurozone inflation continues to move upwards and reached a milestone in June, with a gain of 2.0%. This was the first time inflation hit the 2.0% threshold since February 2017. On an annualized basis, Final CPI also came in at 2.0%. The ECB has said it will taper its monthly bond purchases to EUR 15 billion in September and wind up the program completely in December. With this stimulus program on its last legs, attention has focused on whether the ECB will raise interest rates. A rate hike would likely have a significant impact on the markets, as the ECB last raised rates back in 2011. If inflation levels continue to rise, there will be more pressure on the ECB to consider a rate hike sooner rather than later.

Fed Reserve Chair Jerome Powell reaffirmed his positive outlook on the U.S economy in testimony before the Senate Banking Committee earlier this week. Powell said that he expected the labor market to remain tight and inflation to stay close to the Fed’s target of 2 percent for the next several years. Powell added that the Fed would continue to gradually raise interest rates. Lawmakers appeared satisfied with current monetary policy, but Powell did face some pointed questions regarding the escalating trade war, which has raised concerns that economy could take a downturn if the tariff battles continue.

Economic Calendar

Thursday (July 19)

  • There are no German or eurozone events

Friday (July 20)

  • 2:00 German PPI. Estimate 0.3%
  • 4:00 Eurozone Current Account. Estimate 27.2B

*All release times are DST

*Key events are in bold

DAX, Thursday, July 19 at 6:45 DST

Previous Close: 12,765 Open: 12,740 Low: 12,693 High: 12,758 Close: 12,715

DAX climbs to 4-week high as Eurozone CPI rises to 2 percent

The DAX index has posted considerable gains in the Wednesday session. Currently, the DAX is at 12,750 up 0.71% on the day. On the release front, there are no major German or eurozone events.

A milestone was reached on Thursday, as Eurozone Final CPI reached the 2.0% threshold in the June release. On an annualized basis, Final CPI also came in at 2.0%. This marks the highest level since February 2017. As the ECB prepares to wind up its asset-purchase program, the markets are looking for clues about a possible rate hike. Such a move would likely have a significant impact on the markets, as the ECB last raised rates back in 2011. If inflation levels continue to rise, there will be more pressure on the ECB to consider a rate hike sooner rather than later.

With global protectionist winds getting stronger by the week, Japan and the EU signed a free trade agreement on Tuesday. At the signing ceremony, Prime Minister Shinzo Abe and European Council head Donald Tusk said that the deal is a response to growing concerns about protectionism. The agreement will eliminate most tariffs between the EU and Japan, and will be particularly beneficial for Japanese car makers and European food producers. No less important, the agreement marks the largest free trade agreement in the world, as the EU and Japan cover about one-third of global GDP and some 600 million people.

 

Economic Calendar

Wednesday (July 18)

  • 5:00 Eurozone Final CPI. Estimate 2.0%
  • 5:00 Eurozone Final Core CPI. Estimate 1.0%
  • Tentative – German 30-year Bond Auction

*All release times are DST

*Key events are in bold

 

DAX, Monday, July 18 at 7:05 DST

Previous Close: 12,661 Open: 12,725 Low: 12,713 High: 12,779 Close: 12,745

DAX ticks lower as investors look for cues

The DAX index has ticked lower in the Monday session. Currently, the DAX is at 12,521, down 0.12% on the day. On the release front, there are no major German or eurozone events. In economic news, the eurozone trade surplus slipped to EUR 16.9 billion, short of the estimate of EUR 17.6 billion. This marked the lowest surplus since January 2017.

European equity markets showed little change last week and the DAX continues to trade quietly on Monday. Still, the trading tensions hovering in the air have many investors wondering if this is the calm before the storm. On Tuesday, the Trump administration said it was considering imposing tariffs on some $200 billion in Chinese goods, which would be a significant escalation in the trade war between the two economic giants. China has promised to respond with “firm and forceful measures”, but hasn’t provided any details. With neither side showing any flexibility, the markets could be heading for stormy waters if China retaliates.

Trade policy is not part of the Federal Reserve’s mandate, but Fed policymakers continue to voice concern about the escalating trade war between the U.S and its major trading partners, particularly China. On Friday, Dallas Fed President Robert Kaplan said he would have to downgrade his outlook if the tariff battle continues. Kaplan said that U.S tariffs on steel and aluminum imports had dampened capital expenditures plans and further trade tensions could lead to currency fluctuations and geopolitical instability.

 

Economic Calendar

Monday (July 16)

  • 5:00 Eurozone Trade Balance. Estimate 17.6B. Actual 16.9B

*All release times are DST

*Key events are in bold

 

DAX, Monday, July 16 at 7:40 DST

Previous Close: 12,540 Open: 12,534 Low: 12,523 High: 12,605 Close: 12,525

DAX steady as investors search for cues

The DAX index is showing limited movement in the Friday session. Currently, the DAX is at 12,510, up 0.14% on the day. On the release front, there are no major German or eurozone events. The German Wholesale Price Index dipped to 0.5% in June, down from 0.8% a month earlier. This edged above the estimate of 0.4%.

European equity markets held their own this week, and the DAX and the CAC indexes have shown little movement over the week. Still, the trading tensions hovering in the air have many investors wondering if this is the calm before the storm. On Tuesday, the Trump administration said it was considering imposing tariffs on some $200 billion in Chinese goods, which would be a significant escalation in the trade war between the two economic giants. China has promised to respond with “firm and forceful measures”, but hasn’t provided any details. With neither side showing any flexibility, the markets could be heading for stormy waters if China retaliates.

At last month’s ECB policy meeting, the markets finally received some clarity with regard to the Bank’s asset-purchase program (QE). ECB President Mario Draghi said that the ECB would taper the purchases from EUR 30 billion to 15 billion in September, and terminate the program completely in December. True to form, Draghi left open the possibility of extending QE if needed. Still, with the eurozone economy generally performing well and inflation up to 1.7%, the markets are optimistic that the ECB will wind up QE on schedule. That means that attention is focusing on the timing of a rate hike. At the June meeting, the ECB said it would keep hold rates at current levels “through the summer” of 2019, but this wording is vague, leaving the precise timing open to debate. Does this phrase mean that that the ECB will wait until the October meeting, or could the ECB raise rates during the summer, if conditions warrant a hike? ECB policymakers will be carefully monitoring growth and inflation data in the eurozone, with strong numbers reinforcing the case to raise interest rates sooner rather than later.

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Economic Calendar

Friday (July 13)

  • 2:00 German WPI. Estimate 0.4%
  • All Day – ECOFIN Meetings

*All release times are DST

*Key events are in bold

DAX, Friday, July 13 at 6:10 DST

Previous Close: 12,492 Open: 12,539 Low: 12,498 High: 12,584 Close: 12,521

DAX gains ground as German CPI matches estimate

The DAX index has posted considerable gains in the Thursday session, rebounding after losses on Wednesday. Currently, the DAX is at 12,503, up 0.69% on the day. On the release front, German Final CPI slipped to 0.1% in June, down from 0.5% a month earlier. Still, the reading matched the estimate. Eurozone Industrial Production rebounded with a strong gain of 1.3%, edging above the forecast of 1.2%. The ECB released the minutes of its June policy meeting. On Friday, Germany releases the Wholesale Price Index.

Trade tensions between the U.S and its trading partners continue, keeping investors uneasy. Although the equality markets have reacted negatively to the trade tariffs, the overall impact on the markets has been muted. German markets, for example, have posted gains in July. The U.S and China imposed tariffs on each other of some $30 billion, the Trump administration has raised the ante, threatening to hit China with further tariffs on $200 billion worth of Chinese goods. China cannot retaliate in kind, since it does not import that amount of goods from the U.S. Still, the Chinese can take steps, such as making it more difficult for U.S companies to do business in China, or lowering the value of the Chinese yuan.

With the ECB poised to wind up its asset-purchase program in September, attention is now focusing on the timing of a rate hike by the central bank. In June, the ECB said it would keep hold rates at current levels “through the summer” of 2019, but this wording is vague, leaving the precise timing open to debate. Does this phrase mean that that the ECB will wait until the October meeting, or could the ECB raise rates during the summer, if conditions warrant a hike? It would seem unlikely that policymakers will raise rates before the asset-purchase program is terminated, but the ECB has not shut the door on such a scenario. The ECB is forecasting that inflation will reach 1.7% in 2018, which is not far from its target of just below 2 percent. If oil prices were to surge and send inflation higher, there will be more pressure on policymakers to raise interest rates.

  Equities shrug off trade tariff tensions

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Economic Calendar

Thursday (July 12)

  • 2:00 German Final CPI. Estimate 0.1%. Actual 0.1%
  • 5:00 Eurozone Industrial Production. Estimate 1.2%. Actual 1.3%
  • All Day – Eurogroup Meetings
  • 7:30 ECB Monetary Policy Meeting Accounts

Friday (July 13)

  • 2:00 German WPI. Estimate 0.4%
  • All Day – ECOFIN Meetings

*All release times are DST

*Key events are in bold

 

DAX, Thursday, July 12 at 7:25 DST

Previous Close: 12,417 Open: 12,471 Low: 12,409 High: 12,494 Close: 12,501

DAX slides as trade tensions spook equity markets

The DAX index has posted sharp losses in the Wednesday session. Currently, the DAX is at 112,457, down 1.21% on the day. On the release front, there are no major German or European events. ECB President Mario Draghi spoke at an event in Frankfurt but did not comment on monetary policy. On Thursday, Germany releases Final CPI and the ECB publishes its minutes from the June policy meeting.

Global markets are seeing red on Wednesday, as investors remain uneasy about the tariff battle being waged between the U.S and its major trading partners, particularly China. After the U.S and China imposed tariffs on each other of some $30 billion, the Trump administration has raised the ante, threatening to hit China with further tariffs on $200 billion worth of Chinese goods. China cannot retaliate in kind, since it does not import that amount of goods from the U.S. Still, the Chinese can take steps which will make it more difficult for U.S companies to do business in China. President Trump’s presence at the NATO summit will not bolster investor confidence, as Trump has lashed out at Germany and other NATO members for not paying their fair share in defense spending.

The eurozone could be headed into headwinds in the second half of 2018, according to the well-respected ZEW Economic Sentiment indicators. The German and eurozone releases both dropped to their lowest levels since August 2012. The surveys indicate the views of financial experts, who are clearly concerned about the economic outlook for the next six months. Internal divisions over migration and fears over a full-blown global trade war have investors worried that the eurozone outlook could worsen, which would likely send European equity markets to lower ground.

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Economic Calendar

Wednesday (July 11)

  • 3:00 ECB President Mario Draghi Speaks
  • Tentative – German 10-year Bond Auction. Actual 0.36/1.6

Thursday (July 12)

  • 2:00 German Final CPI. Estimate 0.1%
  • 5:00 Eurozone Industrial Production. Estimate 1.2%
  • All Day – Eurogroup Meetings
  • 7:30 ECB Monetary Policy Meeting Accounts

*All release times are DST

*Key events are in bold

 

DAX, Wednesday, July 11 at 7:05 DST

Previous Close: 12,609 Open: 12,504 Low: 12,428 High: 12,515 Close: 12,457