The DAX index has started the week with sharp losses, continuing the downward trend seen on Friday. Currently, the DAX is at 12,834, down 1.35% on the day. On the release front, there are no German or eurozone indicators. The highlight of the day is the opening of the ECB Forum, which kicks off with a speech from ECB President Mario Draghi. On Tuesday, Draghi will participate in a panel discussion. As well, the eurozone releases current account, with the surplus expected to drop to EUR 30.3 billion.
It’s been a roller-coaster ride for the DAX, which soared on Thursday, but quickly reversed directions. Investor risk appetite has waned, after U.S President Trump imposed further tariffs on some $50 billion of Chinese products. China has promised to retaliate against U.S imports, as trade ties between the world’s two largest economies continue to deteriorate. With the U.S recently slapping tariffs on the E.U and the NAFTA talks in pause mode, it is no wonder that investor anxiety has risen. If the trade war between the U.S and its partners continues to escalate, traders can expect global equities to continue to lose ground.
The DAX jumped 1.6% on Thursday, but has since given up most of these gains. The markets jumped after the ECB policy meeting, when the ECB said that it had no intention of raising interest rates prior to the second half of 2019. The ECB pledged to taper its bond-purchase program to EUR 15 billion/mth, in October, down from the current pace of EUR 30 billion/mth. The program will wind up at the end of the year. However, investors detected a ‘dovish flavor’ to the announcement, as the ECB added that interest rates would remain steady “at least through the summer of 2019”, giving policymakers plenty of wiggle-room to delay any rate hikes. The markets were anticipating a rate hike shortly after the end of the bond-purchase program, so this announcement was a disappointment. ECB head Mario Draghi sounded dovish in his press conference, saying that the eurozone economy was facing “increasing uncertainty”. Draghi was likely referring to the G-7 meeting which ended in disarray as well as the election of a euro-sceptic government in Italy. The ECB also lowered its growth forecast for the eurozone to 2.1%, down from 2.4% earlier this year.
Mario Draghi, the master of the dark art of central bank communiqué
Dollar rises on falling risk appetite
Monday (June 18)
- 6:00 German Buba Monthly Report
- 13:30 ECB President Mario Draghi Speaks
Tuesday (June 19)
- 4:00 ECB President Mario Draghi Speaks
- 4:00 Eurozone Current Account. Estimate 30.3B
*All release times are DST
*Key events are in bold
DAX, Monday, June 18 at 7:35 DST
Previous Close: 13,8010 Open: 12,955 Low: 13,824 High: 13,982 Close: 12,834
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Kenny Fisher