DAX Rallies to 2-Week High, German Retail Sales Sparkles

The DAX continues to head higher and has posted strong gains in the Friday session. Currently, the index is at 13,310.50, up 1.08% on the day. The DAX is currently at its highest level since December 19 and has jumped 3.2% this week. On the release front, German Retail Sales jumped 2.3%, crushing the estimate of 1.0%. This easily beat the estimate of 1.0%. Eurozone CPI Flash Estimate ticked lower to 1.4%, but matched the forecast. In the US, the focus remains on employment data, led by Nonfarm Payrolls. The markets are braced for the indicator to slow down to 190 thousand.

German economic data hasn’t missed a beat, as December numbers continue to impress and have boosted the euro as well as German stock markets. Retail Sales soared 2.3%, its fastest pace since October 2016. Services and Manufacturing PMIs improved and continue to point to strong expansion. The labor market remains robust, as unemployment rolls dropped sharply. The economy hasn’t missed a beat, despite an uncertain political landscape in the eurozone’s largest economy. President Angela Merkel is now looking at the Social Democrats to help her make a new government, and preliminary talks are scheduled to begin on Sunday. The negotiations are likely to be lengthy, and strong disagreements on immigration policy and taxation could unravel the talks, which would trigger new elections.

The Federal Reserve minutes released the minutes of its December meeting on Wednesday. At that meeting, the Fed raised interest rates for a third time in 2018, to a range of between 1.25% and 1.50%. The minutes were positive in tone, reflecting a robust US economy. Policymakers noted that economic activity was expanding at a “solid pace”, buoyed by improved consumer and business spending, as well as a stronger global economy. FOMC members revised upwards their projection for GDP in 2018, from 2.1% to 2.5%. The minutes noted that new tax reform is expected to raise economic growth, but the Fed is unsure on the impact of the new law in areas such as the labor market. As for inflation, Fed officials remain concerned that inflation levels are well below the target of 2%, and this trend could continue.

Economic Calendar

Friday (January 5)

• 2:00 German Retail Sales. Estimate 1.0%. Actual 2.3%
• 4:10 Eurozone Retail PMI. Actual 53.0
• 5:00 Eurozone CPI Flash Estimate. Estimate 1.4%. Actual 1.4%
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%. Actual 0.9%
• 5:00 Eurozone PPI. Estimate 0.3%. Actual 0.6%
• 8:30 US Nonfarm Employment Change. Estimate 190K

*All release times are GMT

*Key events are in bold

DAX, Friday, January 5 at 6:30 EDT

Open: 13,200.50 High: 13,330.50 Low: 13,200.00 Close: 13,310.50

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