The DAX index has started the week with strong gains. In the Monday session, the DAX is trading at 12,309 points, up 0.56% on the day. On the release front, German and eurozone indicators missed their estimates. Germany’s trade surplus fell to EUR 19.2 billion, well below the estimate of EUR 23.1 billion. This marked the smallest surplus since January 2017. Eurozone Sentix Investor Confidence softened for a third straight month, coming in 19.6, short of the forecast of 21.2 points.
The US-China tariff dispute continues, as the US has imposed tariffs on Chinese products and China retaliated in kind. Still, investors are cautiously optimistic at the start of the new trading week. On Sunday, US officials sought to lower the temperature, and Treasury Secretary Steve Mnuchin said that he doesn’t “expect there will be a trade war.” The markets will be keeping a close eye on China’s Boao Forum, known as the ‘Asian Davos’, where Chinese President Xi Jinping will make a major address on Tuesday.
German industrial numbers disappointed last week. Factory Orders posted a weak gain of 0.3%, well off the forecast of 1.6%. On Friday, Industrial Production declined 1.6%, compared to an estimate of 0.2%. This marked the fifth decline in the past six months. Earlier in the week, German Manufacturing PMI softened to 58.2, missing the estimate of 58.4. Although the reading indicated expansion, there is cause for concern as it marked an 8-month low.
With the eurozone economy continuing to perform well, unemployment levels have been steadily falling. The rate dipped to 8.5% in February, compared to 9.5% in February 2017. This reading marked the lowest unemployment rate since December 2008. Inflation levels remain slightly above 1 percent, well below the ECB target of around 2 percent. This means that the ECB is unlikely to change its monetary policy, although Germany wants to see a tighter policy, which would be better suited to its robust economy. In January, the ECB tapered its stimulus program, from EUR 60 billion to 30 billion per month. The stimulus is scheduled to wind up in September, and it remains an open question as to whether Mario Draghi will extend the scheme. If the eurozone economy remains on track and inflation moves higher, there is a strong likelihood that the ECB will adopt a policy of normalization, after years of stimulus.
Monday (April 9)
- 2:00 German Trade Balance. Estimate 23.1B. Actual 19.2B
- 4:30 Eurozone Sentix Investor Confidence. Estimate 21.2. Actual 19.6
*All release times are DST
*Key events are in bold
DAX, Monday, April 9 at 7:15 EDT
Prev. Close: 12,241 Open: 12,323 Low: 12,285 High: 12,372 Close: 12,309
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