DAX Unchanged on Mixed German Reports

The DAX has ticked lower in the Tuesday session. Currently, the DAX is at 13,472.75, down 0.02% on the day. On the release front, German Industrial Production plunged 1.6%, much weaker than the forecast of -0.7%. Eurozone consumer spending numbers were mixed. Retail PMI slowed to 51.1, down from 52.3 in the previous reading.

German Industrial Production surprised the markets with a dismal reading in September. The indicator declined 1.6%, its worst reading in 2017. This release comes on the heels of Factory Orders, which posted a gain of 1.0%, compared to a decline of -0.1%. Eurozone retail sales reports were mixed on Tuesday. Retail PMI came in at 51.1 in October, pointing to muted expansion in the retail sector. There was much better news from September retail sales, as gain of 0.7% came after two straight declines, and was the strongest gain since February. The markets are hoping for strong euorozone consumer spending in the fourth quarter, given the robust German economy and stronger economic conditions in the eurozone.

German coalition talks are moving slowly, although the unhurried pace has not adversely impacted the robust German economy. However, preliminary talks between Angela Merkel’s conservative bloc and two small parties have not shown much progress, with sharp disagreements over immigrant policy and other issues. Merkel has her work cut out for her, but she is a seasoned negotiator, and will likely be able to cobble together a coalition.

Donald Trump suffered a humiliating defeat with his health care proposal, and the President has now set his sights on tax reform. Trump wants Congress to pass legislation overhauling the tax code before the end of the year, but that will be a tall order, as most Democrats have come out against the proposal, and not all Republicans are on board. The bill would cut corporate taxes from 35% to 20%, but predictably, Democrat and Republican lawmakers are at odds as to whether the bill will lower taxes for the middle class. Expectations that Trump will cut taxes has been the catalyst for a stock market rally over the past year, and if the bill does become law, the US dollar will likely gain ground.

Economic Calendar

Tuesday (November 7)

• 2:00 German Industrial Production. Estimate -0.7%. Actual -1.6%
• 4:00 ECB President Mario Draghi Speaks
• 4:10 Eurozone Retail PMI. Actual 51.1
• 5:00 Eurozone Retail Sales. Estimate 0.6%. Actual 0.7%
• All Day – ECOFIN Meetings

*All release times are GMT

*Key events are in bold

DAX, Tuesday, November 7 at 6:40 EDT

Open: 13,525.50 High: 13,528.50 Low: 13,462.25 Close: 13,472.75

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