Stronger Risk Appetite Sends DAX Higher

The DAX index has posted gains in the Thursday session. The DAX is currently trading at 12,073.00, up 0.59% on the day. On the release front, German Retail Sales was unexpectedly weak, declining 1.2%. This was well short of the forecast of -0.5%. German Unemployment Change came in at -5 thousand, beating the estimate of -6 thousand. Euro zone CPI Flash Estimate accelerated to 1.5%, edging above the forecast of 1.4%. As well, the euro zone unemployment rate remained unchanged at 9.1%. On Friday, the US releases Nonfarm Employment Change, which is expected to slow to 180 thousand.

US GDP sparkled on Wednesday, helping restore investor risk appetite, which took a hit after tensions rose between North Korea and the US. Preliminary GDP (second estimate) for the second quarter was revised to 3.0%, a marked improvement from the first estimate of 2.6%. Consumer confidence and spending remain strong and helped contribute to the strong GDP report, as the economy posted its strongest gain since the first quarter of 2015. However, solid consumer spending has failed to boost inflation, which continues to hover at low levels. The lack of inflation could hamper the Federal Reserve’s plans to raise interest rates, with the likelihood of a rate hike in December standing at just 35%. Nonfarm Payrolls report will be released on Friday, and if this indicator also beats the forecast, it would be a strong signal that the economic momentum has continued into the third quarter.

The euro has enjoyed a strong run against in the dollar in recent months, jumping 12.0% since April 1. On Tuesday, the currency pushed above the 1.20 level for the first time since January 2015. The euro has benefited from stronger growth in the eurozone in 2017, led by robust growth in Germany. As well, investors are anticipating that the ECB will provide some guidance on plans regarding its asset purchase program (QE), which is scheduled to terminate in December. The ECB is widely expected to taper its QE program early next year, but so far has been mum about its plans. ECB President Mario Draghi opted not to discuss monetary policy at last week’s meeting of central bankers at Jackson Hole, which has increased speculation that the issue will be addressed at the bank’s policy meeting on September 7.

Economic Calendar

Thursday (August 31)

• 2:00 German Retail Sales. Estimate -0.5%. Actual -1.2%
• 3:55 German Unemployment Change. Estimate -5K. Actual -6K
• 5:00 Euro zone CPI Flash Estimate. Estimate 1.5%. Actual 1.4%
• 5:00 Euro zone Core CPI Flash Estimate. Estimate 1.2%. Actual 1.2%
• 5:00 Euro zone Unemployment Rate. Estimate 9.1%. Actual 9.1%

Upcoming Events

Friday (September 1)

• 8:30 US Nonfarm Employment Change. Estimate 180K

*All release times are EDT

*Key events are in bold

DAX, Thursday, August 31 at 7:55 EDT

Open: 12,082.50 High: 12,102.50 Low: 12,047.00 Close: 12,071.00

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