The DAX remains close to the 12,000 level, as the index trades at 12,024.25 on Wednesday. On the release front, Eurozone Final CPI came in at 1.5%, matching the forecast. The Eurozone trade surplus jumped to EUR 19.2 billion, above the estimate of EUR 18.6 billion. On Thursday, we’ll get a look at German PPI and Eurozone Consumer Confidence.
Eurozone consumer inflation softened in March, but matched the forecast. Final CPI slipped to 1.5%, compared to 2.0% a month earlier. The indicator has been steadily rising, and climbed to 2.0% in February, which is the ECB’s inflation target. This had led to speculation that the ECB might have to consider tightening its monetary policy, either by lowering interest rates or tapering its asset-purchase program (QE). The ECB’s asset-purchase program is scheduled to remain in place until December, although the central bank could opt to bring up that date or taper QE if growth and inflation numbers in the Eurozone are unexpectedly strong. There are also political considerations at play, as the ECB is reluctant to make any significant monetary moves with upcoming elections in France and Germany.
France goes to the ballot box on April 23 in the first round of the presidential election. An opinion poll on Wednesday shows an extremely tight race, with centrist Emmanuel Macron at 23% and far-right candidate Marine Le Pen at 22.5%. They are followed by center-right Francois Fillon at 19.5% and far-left Jean-Luc Melenchon at 19 percent. Both Le Pen and Melenchon are running on an anti-EU platform, so investors remain nervous ahead of the vote. Macron is expected to win decisively over Le Pen, should the two candidates face off in the second round in May.
The Federal Reserve has broadly hinted that it plans two more rate hikes in 2017. There have been calls from some Fed policymakers to raise rates three more times, but this seems unlikely, given disappointing retail sales and CPI numbers in March. These weak numbers are likely to make the Fed more dovish, and prompted the Atlanta and New York Federal Reserve banks to lower their outlook for US economic growth for the first quarter of 2017. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but this has not translated into stronger consumer spending, a key driver of economic growth. What can we expect next from the Fed? The odds of a rate hike in June are currently priced at 45%, according to the CME Group, down sharply from 65% earlier in April.
Wednesday (April 19)
- 4:00 Italian Trade Balance. Estimate 2.24B. Actual 1.88B
- 5:00 Eurozone Final CPI. Estimate 1.5%. Actual 1.5%
- 5:00 Eurozone Final Core CPI. Estimate 0.7%. Actual 0.7%
- 5:00 Eurozone Trade Balance. Estimate 18.6B. Actual 19.2B
- Tentative – German 30-y Bond Auction
Thursday (April 20)
- 2:00 German PPI. Estimate 0.2%
- Tentative – Spanish 10-y Bond Auction
- 10:00 Eurozone Consumer Confidence. Estimate -5
*All release times are EST
*Key events are in bold
DAX, Wednesday, April 19 at 6:50 EST
Open: 12,015.75 High: 12,038.75 Low: 11,999.50 Close: 12,024.25
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