DAX Steady as Geopolitical Tensions Weigh

The DAX is quiet on Wednesday, trading at 12,154.01. On the release front, German WPI came in at 0.0%, short of the forecast of 0.4%. In the US, there are no major events on the schedule. President Donald Trump will conduct an interview with the Fox Business Network, and will discuss health care, tax reform, and the crisis in Syria and North Korea. On Thursday, Germany and France will publish Final CPI.

The DAX continues to hover above the symbolic 12,000 level, but investors remain cautious about escalating tensions in Syria and North Korea. The US bombed a Syrian military base last week, in response to a chemical attack by Syrian warplanes. Russia has strongly condemned the US move, chilling relations even further between the US and Russia. President Trump has also sent warships to the Korea peninsula, in a show of strength against North Korea, which continues to test ballistic missiles in defiance of the international community. If tensions escalate on either of these fronts, stock markets could lose ground.

The eurozone economy has shown stronger growth in the first quarter, and this has been reflected in the DAX ,which has recorded gains of 4.8 percent during this time. Germany has led the way, with strong manufacturing and services numbers. With economic conditions improving, investor confidence levels have followed suit and posted strong numbers in Q1. Eurozone Sentix Investor Confidence climbed to 23.9 points in April, pointing to strong optimism among investors and analysts. German ZEW Economic Sentiment, which surveys the mood of German investors, sparkled in April, jumping to 19.5 points, well above the forecast of 13.2 points. This marked the strongest reading since August 2015.

On Monday, Federal Reserve Chair Janet Yellen said that with the economy close to full employment and 2 percent inflation, Fed policymakers were looking to reduce the support that the central bank was providing the economy. The minutes of the March meeting indicated that the Fed plans to trim the $4.5 trillion balance sheet, which has ballooned as a result of the huge asset-purchase program which started in 2008. The Fed plans to raise rates twice more in 2017, with the next rate expected in June. Yellen emphasized that the Fed’s policy stance is neutral, as interest rate increases will be gradual, given that the economy is growing at a moderate pace.

Economic Calendar

Wednesday (April 12)

• 6:00 German WPI. Estimate 0.4%. Actual 0.0%
• 9:32 German 10-y Bond Auction. Estimate 0.21%
• 10:00 US President Trump Speech

Thursday (April 13)

• 6:00 German Final CPI. Estimate 0.2%
• 6:45 French Final CPI. Estimate 0.6%

*All release times are EST

*Key events are in bold

DAX, Wednesday, April 12 at 7:35 EST

Open: 12,174.96 High: 12,242.76 Low: 12,145.14 Close: 12,154.01

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