DAX slips to 4-week low on bond yields, IMF Report

The DAX index has posted considerable losses in the Tuesday session. Currently, the index is at 11,888, down 0.48% on the day. On the release front, the sole event is Germany’s trade surplus has climbed to EUR 18.3 billion, well above the estimate of EUR 15.9 billion. On Wednesday, Germany holds a bond auction for 10-year bonds.

U.S treasury bonds yields continue to climb, weighing on global equity markets. On Tuesday, the yield on 10-year treasury notes hit 3.26%, the highest yield since 2011. As well, 30-year treasury bonds climbed to 3.44%, a four-year high. Eurozone bond yields have also risen, pushing European stock markets to multi-week lows. Asian stock markets hit 17-month lows on Tuesday, weighing on European markets. Earlier on Tuesday, the DAX dropped to its lowest level since September 11.

Investor risk appetite was further dampened on Tuesday, after the IMF released a report in which it lowered its global growth forecasts. The IMF revised growth downwards to 3.7% for 2018 and 2019, down from 3.9% in April. The IMF took note of the trade war between the U.S and its major trading partners, adding that the downward revisions were most notable in emerging countries such as Turkey and Brazil.

With the ECB on track to wind up its stimulus program at the end of the year, the markets are focusing on the timing of a rate hike next year. The ECB has stated that it will not raise rates before the “end of the summer”, which many analysts have interpreted as September 2019. However, inflation has climbed significantly in the eurozone, and the ECB could opt to raise interest rates before September in order to curb inflation. Besides inflation, ECB policymakers will have to weigh other factors such as the U.S-China trade war when deciding when to raise interest rates.

Noisy Markets

Will the bond market bloodbath resume?

Economic Calendar

Tuesday (October 9)

  • 2:00 German Trade Balance. Estimate 15.9B. Actual 18.3B

Wednesday (October 10)

  • Tentative – German 10-year Bond Auction

*All release times are DST

*Key events are in bold

DAX, Tuesday, October 9 at 7:20 DST

Previous Close: 11,947 Open: 11,958 Low: 11,872 High: 11,983 Close: 11,888

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Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.