DAX Yawns as German Business Confidence Jumps

The DAX is almost unchanged in the Wednesday session, as the index remains close to the symbolic 13,000 level. Currently, the DAX is at 13,013.50, unchanged from the Tuesday close. On the release front, German Ifo Business Climate continued to accelerate with a reading of 116.7, well above the forecast of 115.3 points. On Thursday, the ECB releases its rate statement.

German indicators continue to point upwards, indicative of a robust economy. On Tuesday, German Manufacturing PMI posted a strong reading of 60.5, beating expectations. The manufacturing sector continues to expand, buoyed by strong domestic demand and the global appetite for German exports. There was more good news on Wednesday, as German Ifo Business Climate jumped to 116.7, an all-time high. This thumbs-up from the business confidence suggests that the German economy will enjoy a strong fourth quarter.

The markets are keeping a close eye on the ECB, which will set the benchmark rate on Thursday. Investors are in a positive mood on Tuesday, ahead of the ECB policy meeting on Thursday. ECB President Mario Draghi will have to maneuver carefully, as the ECB decides whether to start unwinding its asset purchases program, which is currently pegged at EUR 60 billion/month. Back in the summer, the ECB said it would trim the program in the “autumn”, but didn’t make any moves at the September meeting. Expectations of a significant reduction in stimulus, perhaps to EUR 30 billion/mth, has sent bond yields higher, which in turn could push European stock markets downwards.

Economic Calendar

Wednesday (October 25)

• 4:00 German Ifo Business Climate. Estimate 115.3. Actual 116.7
• Tentative – German 10-year Bond Auction

Thursday (October 26)

• 2:00 German GfK Consumer Climate. Estimate 10.8
• 4:00 Eurozone M3 Money Supply. Estimate 5.0%
• 4:00 Eurozone Private Loans. Estimate 2.8%
• 7:45 ECB Minimum Bid Rate. Estimate 0.00%
• 8:30 ECB Press Conference

*All release times are GMT

*Key events are in bold

DAX, Wednesday, October 25 at 6:40 EDT

Open: 13,000.50 High: 13,048.50 Low: 12,983.50 Close: 13,013.75

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