DAX remains under pressure as German bond yield jumps

The DAX index continues to lose ground this week. In the Wednesday session, the index is at 11,917 down 0.37% on the day. On the release front, there are no key German or eurozone indicators. In Germany, the yield on 10-year bonds rose to 0.55%. On Thursday, the ECB releases the details from its August policy meeting.

Yields on U.S treasury bonds yields continue to climb this week, pushing global equity markets lower. On Tuesday, the yield on 10-year treasury notes reached 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, and on Wednesday, German 10-year bonds touched their highest level since May. This trend has pushed European stock markets lower. On Tuesday, the DAX dropped as much as 1.5%, but managed to recover most of these losses. 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 poised to wind up its stimulus program at the end of the year, the markets are focusing on the timing of a rate hike in 2019. 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.

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Wednesday (October 10)

  • 5:33 German 10-year Bond Auction. Actual 0.55/1.1

Thursday (October 11)

  • 7:30 ECB Monetary Policy Meeting Accounts

*All release times are DST

*Key events are in bold

DAX, Wednesday, October 10 at 7:20 DST

Previous Close: 11,977 Open: 11,986 Low: 11,887 High: 11,986 Close: 11,917

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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.