The DAX index has posted strong gains in the Friday session. Currently, the DAX is at 12,304, up 1.04% on the day. In economic news, German retail sales plunged 2.1%, well off the estimate of -0.5%. Eurozone CPI Flash Estimate came in at 2.0%, matching the estimate. Core CPI Flash Estimate also matched expectations, with a gain of 1.0%.
EU summits are often non-events for the markets, but the current meeting of EU leaders in Brussels has given a shot in the arm to the euro and European equity markets. Investors responded with a thumbs-up as the EU announced that an agreement had been reached on the thorny issue of migration. The issue had threatened to topple the German government, and countries such as Italy and Hungary were looking to drastically reduce immigration, putting them on a collision course with EU policy. Under the agreement, rescued migrants who are in EU territory will be sent to “control centers” in countries that agree to have them. The main entry point for refugees has been Italy and Greece, and under the agreement, other members will accept some of the migrants. Still, the deal was short on details, and appears to be a stopgap which papers over the deep divisions that still remain in the EU over immigration.
The surprising breakthrough over the immigration crisis has sent the DAX higher, as the markets ignored a dismal German retail sales release in May. The sharp decline of 2.1% marked the fifth decline in the past six months and was the steepest drop in 2018. Inflation numbers have also raised concerns, as German Preliminary CPI fell to 0.1%, down from 0.5% a month earlier. Eurozone inflation numbers were stronger, as CPI Flash Estimate and Core CPI Flash Estimate both matched their estimates. Next week, Germany releases PMIs from the manufacturing and services sectors. These indicators have been dropping in recent months, and if this trend continues, investors could get cold feet and send the equity markets lower.
Friday (June 29)
- 2:00 German Retail Sales. Estimate -0.5%. Actual -2.1%
- 2:00 German Import Prices. Estimate 1.0%. Actual 1.6%
- 3:55 German Unemployment Change. Estimate -8K. Actual -15K
- 5:00 Eurozone CPI Flash Estimate. Estimate 2.0%. Actual 2.0%
- 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%. Actual 1.0%
- Day 2 – EU Economic Summit
*All release times are DST
*Key events are in bold
DAX, Friday, June 29 at 7:10 DST
Previous Close: 12,177 Open: 12,299 Low: 12,260 High: 12,383 Close: 12,304
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