The DAX has posted strong gains on the weekend, boosted by the results of the French presidential election. which showed Emmanuel Macron and Marine Le Pen advancing to the second round. The DAX is currently trading at 12,386.25, up 2.9 percent since the Friday close. German bank shares have posted sharp gains in the Monday session, as Commerzbank is up 9.35%, while Deutsche Bank has gained 7.26%. On the release front, there was more positive news as German Ifo Business Climate improved to 112.9, beating the forecast of 112.4 points.
German business confidence levels continue to improve as Ifo Business Climate climbed to 112.9 in April, up for 112.3 a month earlier. This was its highest level since July 2011. This excellent reading underscores a strong German economy, which has been the locomotive pulling the eurozone, which has showed stronger growth in the first quarter. Germany releases consumer confidence and Preliminary CPI on Thursday.
Nervous stock markets eyed the Sunday French election with bated breath, but investors cheered the results, pushing the euro and European stock markets over the weekend. The best news was what didn’t happen in the first round, as the nightmarish scenario of a runoff between Le Pen and far-Left candidate Jean-Luc Mélenchon was averted. The first round featured 11 candidates, and the election whittled the field down to just 2 candidates – centrist Emmanuel Macron and far-right Marie Le Pen. Macron garnered 24% of the vote and Le Pen 22%, which was what most polls leading up to the election predicted. The runoff vote takes place on May 7 and French voters will have a clear choice between Macron, who served as an economic minister, and Le Pen, who is running on an anti-EU platform. We can expect daily opinion polls to be market-movers, as was the case before the first round. Macron goes into next week’s vote as a heavy favorite, and two candidates in the first round have thrown their support behind Macron – center right François Fillon and Socialist Benoit Hamon.
What’s next for the Federal Reserve? The Fed has broadly hinted that it will gradually raise rates in 2017, but it’s unclear how many times Janet Yellen will press the rate trigger. Most analysts are expecting two more moves this year, but there have been calls from some Fed policymakers for three more hikes. However, soft retail sales and CPI numbers in March have made the Fed more dovish, and on Tuesday, the Atlanta and New York Federal Reserve lowered their outlook for US economic growth for the first quarter. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but surprisingly, this has not translated into stronger consumer spending, a key driver of economic growth. Will the Fed raise rates in June? The CME Group shows the odds of a June hike have dropped to 50%, compared to 64% earlier in April.
Monday (April 24)
- 4:00 German Ifo Business Climate. Estimate 112.4. Actual 112.9
- 6:00 German Buba Monthly Report
*All release times are EST
*Key events are in bold
DAX, Monday, April 24 at 6:30 EST
Open: 12,312.00 High: 12,398.50 Low: 12,287.50 Close: 12,386.25