DAX falls to 2-week low on weak German services PMI, trade tensions

The DAX index continues to lose ground this week. In Wednesday trade, the DAX is at 11,244, down 0.78% since the Tuesday close. On the release front, German and eurozone services PMIs both softened in November. German Final Services PMI dropped to 53.3, matching the estimate. Eurozone Final Services PMI dipped to 53.4, above the estimate of 53.1. Eurozone retail sales posted a gain of 0.3%, marking a 4-month high. This beat the estimate of 0.2%. On Thursday, Germany releases Factory Orders and OPEC members will gather for a meeting in Vienna.

German stock markets started the week with gains, but this proved to be short-lived, as investor optimism following the Trump-Xi meeting quickly dissipated. Earlier on Wednesday, the DAX dropped to its lowest level since November 21, and has declined 2.50% this week. The markets climbed after President Trump and Chinese President Xi reached an agreement, whereby the U.S. agreed to suspend further tariffs until March 1. However, it’s unclear if the reprieve is simply a pause in the trade war between the world’s two largest economies. The sides remain far apart on a number of issues, including repeated charges by the U.S. that China is engaged in theft of U.S. intellectual property. The markets have been very sensitive to the trade dispute, and the upcoming negotiations between the U.S. and China, with the likely ups-and-downs, promise to have a significant effect on market movement.

German Services PMI dropped to its lowest level since April, as the eurozone’s largest economy continues to post weak numbers in the fourth quarter. On Monday, Manufacturing PMI dropped to 51.8 in November, down from 52.2 points in October. This marked a fourth straight downturn and was the lowest reading since April 2016. The global trade war has taken a bite out of German exports and a slowdown in the eurozone economy has dampened manufacturing growth in Germany. Consumer indicators are also pointing downwards – last week, GfK Consumer Climate dipped to an 18-month low. while retail sales fell by 0.3%, its first decline since July. Consumers are holding tighter to the purse strings, which is hurting economic growth. This does not bode well for the eurozone economy, as the German economy is often a bellwether for the rest of the eurozone.

It’s looking Ugly, hopefully time for a pause

Economic Calendar

Wednesday (December 5)

• All  Day – OPEC-JMMC Meetings
• 3:30 ECB President Draghi Speaks
• 3:55 German Final Services PMI. Estimate 53.3. Actual 53.3
• 4:00 Eurozone Final Services PMI. Estimate 53.1. Actual 53.4
• 5:00 Eurozone Retail Sales. Estimate 0.2%

Thursday (December 6)

• 2:00 German Factory Orders. Estimate -0.4%
• All Day – OPEC Meetings

*All release times are DST

*Key events are in bold

DAX, Wednesday, December 5 at 7:35 EST

 Open: 11,204 Low: 11,259 High: 11,177 Close: 11,244

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