DAX steady, investor confidence drops

The DAX index has ticked higher in the Monday session. Currently, the DAX is trading at 11,537, up 0.13% on the day. On the release front, eurozone investor confidence slumped in November, dropping to 8.8 points. On Tuesday, Germany and the eurozone release services PMIs. As well, Germany releases factory orders and the eurozone will publish PPI. The U.S will hold midterm congressional elections.

The eurozone economy ran into some headwinds in the third quarter, and confidence indicators remain weak as we enter the fourth quarter. The well-respected Sentix investor confidence report for November fell to 8.8 points down from 11.4 a month earlier. This marked its lowest level since October 2016. The index has dropped sharply in 2018 – the heady days of  January, when the index came in at 32.9, appear long gone.

After a dismal October, the DAX has rebounded with gains at the start of November. The DAX plunged 6.7% in October, its worst monthly performance since December 2016. However, the picture has changed in November, as the index has gained 1.0%. Investor sentiment has improved, following reports late last week that U.S President Trump is working on a trade agreement with China, which Trump will present to Chinese President Xi Jinping at a Group of 20 summit in Argentina later this month. The unpredictable Trump has taken a hard line on China, threatening to impose stiff tariffs on all Chinese imports if his meeting with Xi was not successful. This could mean that we are in store for plenty of volatility in the stock markets in November.

The German manufacturing sector slowed for a third straight month in October, as the slowdown has now entered the fourth quarter. The October Manufacturing PMI dipped to  52.2, down from 53.7 points in September. The reading, which points to limited expansion, is the lowest since May 2016. The weak data can be directly attributed to global trade tensions, which have dampened the German export sector. China is Germany’s third largest export market, and a slowdown in China due to U.S trade tariffs could have a chilling effect on the German economy. The German central bank is forecasting zero growth in the third quarter, and growth in the eurozone also softened in the third quarter. German economic data is a bellwether for the eurozone, which means that the eurozone economy could be facing significant headwinds in the fourth quarter, which could spell bad news for the euro.

Decision Time

Markets in wait and see mode ahead of midterms

Economic Calendar

Monday (November 5)

  • 4:30 Eurozone Sentix Investor Confidence. Estimate 9.9. Actual 8.8

Tuesday (November 6)

  • 2:00 German Factory Orders. Estimate -0.4%
  • 3:55 German Final Services PMI. Estimate 53.6
  • 4:00 Eurozone Final Services PMI. Estimate 53.3
  • 5:00 Eurozone PPI. Estimate 0.4%
  • All Day  – US Congressional Elections

*All release times are EST

*Key events are in bold

DAX, Monday, November 5 at 7:45 DST

Open: 11,522 Low: 11,494 High: 11,555 Close: 11,546

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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.