DAX Posts Gains as Markets Optimistic Ahead of Yellen Testimony

The DAX index has posted gains in the Wednesday session, as the index is up 0.70% on the day. Currently, the DAX is at 12,525.50. On the release front, German WPI improved to 0.0%, but fell short of the estimate of 0.2%. Eurozone Industrial Production impressed with a gain of 1.3%. In the US, Federal Reserve Chair Janet Yellen will testify before the House Financial Services Committee. Yellen testifies before the Senate Banking Committee on Thursday. Germany will release Final CPI, which is expected to show a weak gain of 0.2%.

Germany has been the catalyst of an improved eurozone economy, but Europe’s largest economy has not been immune to chronically weak inflation levels. German WPI, an important inflation index, came in at a flat 0.0% in June. The ECB has taken pains to reiterate that it has no plans to exit its aggressive stimulus program until inflation climbs closer to the ECB’s target of 2.0%. However, the central bank has stumbled in getting its message across, as evidenced by the euro rally after the markets seized on Mario Draghi’s comments at the recent ECB forum of central bankers. We’ll get a look at German Final CPI on Thursday. The index has looked weak in second quarter readings, and the estimate for June is just 0.2%.

Aside from strong economic growth, Germany can also boast fiscal stability, despite trying economic conditions in the eurozone. The question of the fiscal stance of the eurozone as a whole was a key topic as eurozone finance ministers met in Brussels this week. Germany has opposed attempts to define the bloc’s fiscal stance as expansionary, and at the Monday meeting, the finance ministers agreed to water this down to a”broadly neutral” stance. The European Commission wants to see France and Italy work on trimming their substantial deficits. As for Germany, which is in much better fiscal shape, the Eurogroup of finance ministers has called on the country to divert more resources to investment and public spending.

The Trump show is again on center stage in Washington, with more revelations about alleged secret ties between Russia and the Trump administration during the US election. This week’s breaking news is that Donald Trump Jr. admitted that a Russian official contacted him and offered to provide him with evidence incriminating Hillary Clinton. Trump and the White House are trying to lower the flames and put a positive spin on the meeting, but the media and lawmakers (including Republicans) aren’t about to let Trump off the hook. This crisis is just the latest miscue for the Trump administration, which hasn’t been able to pass any significant laws through Congress, even though Republicans control both the House of Representatives and the Senate. The latest dark cloud over the White House has dampened investor confidence in the US economy, and European stock markets could take advantage of the latest political scandal in the US.

Economic Calendar

Wednesday (July 12)

  • 2:00 German WPI. Estimate 0.2%. Actual 0.0%
  • 5:00 Eurozone Industrial Production. Estimate 1.0%. Actual 1.3%
  • Tentative – German 10-y Bond Auction. Actual 0.59%
  • 10:00 US Fed Chair Janet Yellen Testifies
  • 10:30 US Crude Oil Inventories. Estimate -3.2M
  • 13:01 US 10-y Bond Auction
  • 14:00 US Beige Book

Thursday (July 13)

  • 2:00 German Final CPI. Estimate 0.2%
  • 10:00 US Federal Chair Janet Yellen Testifies

*All release times are EDT

*Key events are in bold

DAX, Wednesday, July 12 at 8:00 EDT

Open: 12,473.50 High: 12,532.50 Low: 12,467.50 Close: 12,526.00

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Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.