The DAX index is showing limited movement in the Tuesday session. Currently, the DAX is trading at 12,794.00. On the economic front, Eurozone Flash GDP climbed 0.5%, matching the forecast. German ZEW Economic Sentiment disappointed, as the reading of 20.6 fell short of the forecast of 22.3 points. There was better news from Eurozone ZEW Economic Sentiment, which jumped to 35.1, easily beating the forecast of 29.1 points. On Wednesday, the eurozone releases Final CPI, which is expected to rise to 1.9%.
The DAX remains close to record highs, buoyed by a solid reading from growth data for the eurozone. Market predictions for Eurozone growth were on target, as Flash GDP came in at 0.6% in the first quarter of 2017. This figure remained unrevised from the Preliminary GDP release back in April. The eurozone continues to show improved numbers in 2017, boosted in no small part by the German economy, which also expanded 0.6% in the first quarter. However, the well-respected ZEW Economic Sentiment surveys, which gauge optimism among investors and analysts, were a mixed bag for May. The German indicator improved to 20.6, short of expectations. What was more surprising was the unexpected jump from the Eurozone indicator, which improved to 35.1, its strongest level in almost two years. With the eurozone showing stronger growth, has inflation kept up? We’ll get an indication on Wednesday, with the release of Eurozone Final CPI, which is expected to rise to 1.9%. Stronger inflation levels will increase pressure on the ECB to consider tapering its ultra-loose monetary policy. Germany, for one, is finding that ultra-low interest rates is hampering growth, and wants Brussels to adopt a tighter monetary policy.
A rise in oil prices has boosted stock markets, and on Monday, Brent crude climbed close to 2 percent. This surge boosted the DAX, which briefly touched a high of 12,833.00, a new record. The first quarter of 2017 has seen improved numbers in the euro area, largely due to strong numbers from Germany, the largest economy in the eurozone. Germany’s economy expanded 0.6% in the first quarter, compared to a 0.4% gain in Q4 of 2016. What was particularly encouraging was that the expansion was broadly based, with strong consumer and state spending, and an upsurge in the construction and manufacturing and export sectors.
President Trump and his aides continues to be preoccupied with damage control, as the White House and Congress remain focused on Comeygate, as the fallout from Trump’s dismissal of FBI director James Comey continues. There was more bad news for President Trump on Tuesday, with a report in the Washington Post that Trump had shared confidential intelligence reports with Russia’s foreign minister at a meeting last week. The White House has denied the report, but the timing is particularly bad for Trump, who is already under investigation for possible Russian involvement in the presidential campaign. The markets are concerned that Trump will be so busy trying to put out political firestorms, that his agenda of increased fiscal spending and tax reform will stall. These jitters could hurt investor confidence and send global stock markets lower.
Tuesday (May 16)
- 5:00 Eurozone Flash GDP. Estimate 0.5%. Actual 0.5%
- 5:00 German ZEW Economic Sentiment. Estimate 22.3. Actual 20.6
- 5:00 Eurozone Trade Balance. Estimate 18.8B. Actual 23.1B
- 5:00 Eurozone ZEW Economic Sentiment. Estimate 29.1. Actual 35.1
Wednesday (May 17)
- 5:00 Eurozone Final CPI. Estimate 1.9%
*All release times are EDT
*Key events are in bold
DAX, Monday, May 16 at 7:55 EDT
Open: 12,786.50 High: 12,834.75 Low: 12,780.50 Close: 12,794.00