The DAX has lost ground on Wednesday, after losses in the Tuesday session. Currently, the index is at 13,177.50, down 0.28% on the day. On the release front, European indicators missed their estimates. German PPI slowed to 0.1%, shy of the estimate of 0.2%. This marked a 5-month low. As well, Eurozone current account surplus dropped sharply to EUR 30.8 billion, well short of the estimate of EUR 33.4 billion. This was the smallest surplus since July. On Thursday, the US releases third quarter Final GDP.
President Trump’s gift-wrapped Christmas present is ready – almost. The Trump tax reform bill was passed in the House of Representatives and the Senate on Tuesday, but the bill is being sent back to the House for another vote on Wednesday due to a procedural requirement. The bill is expected to be ratified by the House and will then be sent to Trump to be signed into law. As expected, the congressional votes went along party lines, with the Senate narrowly approving the bill by a count of 51-48. This marks the first major overhaul of the US tax code in 30 years, and reduces corporate taxes from 35% to 21%. After failing to overturn Obamacare, the Republicans can finally chalk up their first legislative victory in the Trump administration, ahead of Congressional elections in 2018.
The US economy has looked sharp in 2017, and is expected to wrap up the year with a strong report card, with the release of Final GDP for Q3. Preliminary GDP posted an impressive 3.3% gain, and the markets expect Final GDP to post an identical reading for Final GDP. The Federal Reserve wrapped up 2017 with a quarter-point hike, and another increase is widely expected at the January meeting. Strong economic numbers and this accelerated pace of rate increases bodes well for the US dollar against the euro and other major rivals.
Coalition talks took a shift in Germany, as politicians struggle to form a new government. President Angela Merkel’s conservative bloc suffered losses in the September election, and talks with smaller parties failed to break the political deadlock. Merkel has now shifted her efforts towards her previous junior coalition party, the Social Democrats (SDP). On Friday, the SDP voted to begin exploratory talks with Merkel, with a view to discussing substantive issues in January. Many SDP lawmakers want a more senior role for the SDP in any coalition, and the SDP will likely demand key portfolios in a new government. Despite the political uncertainty, the German economy continues to look very strong.
Wednesday (December 20)
- 2:00 German PPI. Estimate 0.2%. Actual 0.1%
- 4:00 Eurozone Current Account. Estimate 33.4B. Actual 30.8B
- 8:00 German Buba President Jens Weidmann Speaks
Thursday (December 21)
- 8:30 US Final GDP. Estimate 3.3%
*All release times are GMT
*Key events are in bold
DAX, Wednesday, December 20 at 6:20 EDT
Open: 13,243.50 High: 13,252.50 Low: 13,144.50 Close: 13,177.50