The DAX has posted losses on Thursday, as the index trades at 12,112.00. On the release front, German Final CPI dropped to 0.2%, matching the forecast. French Final CPI took the opposite direction, improving to 0.6%, matching the forecast. On Wednesday, President Donald Trump said in a newspaper interview that the value of the US dollar was too strong and that he was in favor of a low interest rate policy. Trump’s comment has sent the greenback lower and is weighing on European stock markets.
The DAX continues to lose ground in April, as investors remain jittery about rising 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 declared that he has sent “an armada” to the Korean peninsula in response to North Korea firing ballistic missiles, and the escalation in rhetoric between North Korea and the US is weighing on the stock markets.
German numbers have been a mix this week, as investor confidence jumped, while inflation indicators weakened. The ZEW Economic Sentiment report sparked with a reading of 19.5, crushing the estimate of 13.2. This marked the strongest gain since August 2015, pointing to strong optimism among institutional investors and analysts. However, inflation levels have softened in March. The Wholesale Price Index dropped to a flat 0.0%, compared to 0.5% a month earlier. This was well short of the forecast of 0.4%. The downward trend continued with Final CPI, which dropped to 0.2%, down from 0.6% in February. Eurozone CPI made a big splash in February, when it hit the ECB’s target of 2.0%, and raising speculation that the ECB might need to respond by tightening monetary policy. However, the indicator softened in March to 1.5%, short of the forecast of 1.8%. The softer March inflation numbers have certainly eased the pressure on the ECB, which is not scheduled to reduce its asset-purchase program until December.
Earlier this week, Federal Reserve Chair Janet Yellen said that with the economy close to full employment and 2 percent inflation, the Fed was in a better position to reduce its support for the US 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 response to the financial crisis in 2008. 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. The Fed is widely expected to raise rates twice more in 2017, with the next rate expected in June. At the same time, some Fed policymakers are in favor of three more rate hikes, which would bring the total this year to four moves.
Thursday (April 13)
- 2:00 German Final CPI. Estimate 0.2%. Actual 0.2%
- 2:45 French Final CPI. Estimate 0.6%. Actual 0.6%
*All release times are EST
*Key events are in bold
DAX, Thursday, April 13 at 6:05 EST
Open: 12,151.50 High: 12,151.50 Low: 12,096.75 Close: 12,112.00