DAX Edges Higher as Eurozone, German Manufacturing PMIs Show Expansion

It continues to be a quiet day for European stock markets, which have reopened on Tuesday after closing on Monday for a holiday. Currently, the DAX is trading at 12,445.00. On the release front, there was positive news from the manufacturing sector. Eurozone and German Manufacturing PMIs pointed to expansion. The Eurozone report came in at 56.8, edging above the forecast of 56.7, while the German reading of 58.2 matched the estimate. On Wednesday, we’ll get a look at the German unemployment rate and Eurozone Preliminary Flash GDP. In the US, the Federal Reserve will release its policy statement.

The DAX has not shown significant movement in the second quarter of 2017, but traders should keep in mind that the index has been trading at record highs. Earlier in the Tuesday session, the DAX touched a new record high of 12,481.25 points. Will this trend continue? Current economic conditions point to the DAX continuing to climb higher. The index has outperformed most eurozone equity indexes in 2017, benefiting from a strong German economy, marked by steady growth and low unemployment. Stronger global demand has boosted Germany’s export sector and the Federal Reserve’s plans to continue to hike rates in 2017 has pushed German stocks to higher levels.

Eurozone growth numbers have pointed upwards in 2017, and more growth has meant more jobs and lower unemployment figures. Just a year ago, the eurozone unemployment rate was at 10.3%, but the rate has been steadily decreasing since then. In February, the rate dropped to 9.5%, and the March release is expected at 9.4%. Germany has led the way, with the unemployment rate dropping to 5.9% in February. Unemployment rolls continue to shrink in Germany, and the decline of 30,000 unemployed persons in February easily beat expectations. The March reading is expected to show another decline of 10,000. If these Eurozone and German job numbers beat expectations, the DAX could respond with gains.

President Donald Trump marked 100 days in office over the weekend, but his administration has been plagued by problems and has little to show for itself. Trump’s popularity is at record lows for a new president, but he managed to avoid the embarrassment of a government shutdown, as lawmakers reached an agreement on the weekend. The short-term spending deal, which has bipartisan support, provides funding for government services until September 30th. The deal does not include any funding for a border wall with Mexico, marking a clear concession on the part of Trump. The White House is hoping that this small victory will be the prelude to more cooperation between the Republicans and Democrats on Capitol Hill, as Trump will need some support from the Democrats in order to pass key legislation such as tax reform, one of Trump’s major campaign planks.

Economic Calendar

Tuesday (May 2)

  • 3:55 German Final Manufacturing PMI. Estimate 58.2. Actual 54.5
  • 4:00 Eurozone Final Manufacturing PMI. Estimate 56.8. Actual 56.2

Wednesday (May 3)

  • 3:55 German Unemployment Rate. Estimate -10K
  • 5:00 Eurozone Preliminary Flash GDP. Estimate 0.5%
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. <1.00%

*All release times are EST

*Key events are in bold

DAX, Tuesday, May 2 at 4:25 EST

Open: 12,477.50 High: 12,436.00 Low: 12,481.25 Close: 12,445.00

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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.