DAX slides on trade war jitters

The DAX index has posted sharp losses in the Tuesday session. Currently, the index is at 12,180, down 1.35% on the day. On the release front, eurozone industrial producer prices rose 0.4% in July. On Wednesday, Germany and the eurozone release Services PMI and we’ll also get a look at eurozone retail sales.

With investors again focused on global trade tensions, European equity markets have nosedived on Tuesday. The DAX has dropped to its lowest level since August 17. Foremost in investors’ mind is the simmering trade dispute between the U.S and China. So far, the two economic giants have imposed $50 billion in tariffs on each other, and President Trump has threatened further tariffs worth some $200 billion, which could be imposed as early as this week. The U.S could elect to impose the tariffs in smaller bites, such as a $50 billion tariff. Trade trouble brews elsewhere as well. Talks are continuing between the U.S and Canada, after Friday’s deadline passed with no agreement in place. The EU has engaged in a tit-for-tat tariff exchange with the United States. The dollar has climbed significantly since trade tensions began in April, at the expense of the equity markets and other major currencies. If trade tensions continue to worsen, equity markets could continue to move lower.

In December, the ECB plans to wind up its asset-purchase program, which has been in play since March 2015. ECB policymakers have taken pains to provide themselves some wiggle room, saying that the program could be extended if inflation suddenly weakens. Still, the markets expect this stimulus plan to be terminated on schedule. In August, the Bank purchased EUR $29 billion, the lowest level since this stimulus program started. Traditionally, August is a quiet month, with many sellers on holiday.

Emerging market losses continue on Tuesday

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EM rout not yet complete

Economic Calendar

Tuesday (September 4)

  • 5:00 Eurozone PPI. Estimate 0.3%. Actual 0.4%

Wednesday (September 5)

  • 3:55 German Final Services PMI. Estimate 55.2
  • 4:00 Eurozone Final Services PMI. Estimate 54.4
  • 5:00 Eurozone Retail Sales. Estimate -0.1%

*All release times are DST

*Key events are in bold

DAX, Tuesday, September 4 at 7:40 DST

Previous Close: 12,346 Open: 12,385 Low: 12,167 High: 12,403 Close: 12,180

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Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.