The DAX index has posted sharp gains in the Tuesday session. In North American trade, the DAX is trading at 12,529 points, up 1.11% on the day. On the release front, German ZEW Economic Sentiment surprised the markets with a sharp drop of 8.2 points. This was much weaker than the estimate of -0.8 points. Eurozone ZEW Economic Sentiment also headed lower, dropping from 13.4 to 1.9 points. This fell well short of the estimate of 7.3 points. On Wednesday, the key event is Eurozone Final CPI.
The German and eurozone economies have looked solid in 2018, making soft ZEW Economic Sentiment reports all the more surprising. The April reports were much weaker than expected, but investors shrugged off the numbers as risk appetite remains high. The German release of -8.2 points showed pessimism on the part of institutional investors and analysts and marked the weakest reading since November 2012. The eurozone release of 1.9 was the lowest since July 2o16. The readings are a major disappointment, as the eurozone economy has been performing well and key indicators have been steady. Investors will be hoping that these ZEW releases are one-time blips and that the May readings will be in line with recent releases.
The ECB minutes pointed to some concerns which could affect plans to wind down its stimulus program. These include the tariff spat between the US and China, which ECB policymakers stated would hurt “all countries involved.” As well, there is concern that Britain’s departure from the European Union could cause more economic harm than previously expected. At the same time, the eurozone economy continues to perform well and inflation has been steady. This makes it unlikely that the ECB will extend stimulus, but could opt for a longer exit path. As for interest rate policy, no rate hikes are expected anytime soon – On Friday, Commerzbank pushed back its forecast for an ECB interest-rate increase by three months to September 2019.
Tuesday (April 17)
- 5:00 German ZEW Economic Sentiment. Estimate -0.8. Actual -8.2
- 5:00 Eurozone ZEW Economic Sentiment. Estimate 7.3. Actual 1.9
Wednesday (April 18)
- 5:00 Eurozone Final CPI. Estimate 1.4%
- 5:00 Eurozone Final Core CPI. Estimate 1.0%
- Tentative- German 10-year Bond Auction
*All release times are DST
*Key events are in bold
DAX, Tuesday, April 17 at 9:00 EDT
Prev. Close: 12,391 Open: 12,441 Low: 12,417 High: 12,542 Close: 12,529
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