DAX surges on renewed optimism over U.S-China talks

The DAX index has recorded sharp gains in the Tuesday session. Currently, the index is at 10,834, up 1.02% on the day. In economic news, both German and Eurozone ZEW Economic Sentiment both improved in December, but still posted sharp declines. In the U.S, the markets are braced for a sharp drop from PPI and Core PPI, with estimates for 0.0% and 0.1%, respectively. On Wednesday, the eurozone releases industrial production.

A bit of positive news on the trade war front was enough to spark a rally on global equity markets. Following reports on Tuesday that U.S and Chinese negotiators had spoken by phone, investor risk appetite jumped higher. The DAX has climbed over 1 percent on Tuesday, led by banking and automaker stocks. BMW and Daimler are more than 2 percent higher, while Volkswagen has surged almost 4 percent. As well, Deutsche Bank has gained 2.6 percent.

The ECB holds a policy meeting on Thursday, and policymakers are expected to finally wind up the bank’s bond purchase program. The scheme commenced in March 2015 and has grown to some EUR 2.5 trillion in assets. The program was implemented in order to kick-start the economy and raise ultra-low inflation levels. Inflation has moved closer to the ECB target of around 2 percent, and the eurozone economy performed well earlier in the year. This prompted the ECB to announce that it would wind up the program in December. However, economic conditions have deteriorated in recent months, as the nagging U.S.-China trade war has weighed on the global economy and hurt the export and manufacturing sectors in Germany and the eurozone. ECB policymakers are not expected to change course, but any hints of re-introducing stimulus in 2019 would likely send European markets lower.

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Economic Calendar

Tuesday (December 11)

• 5:00 German ZEW Economic Sentiment. Estimate -25.0. Actual -17.5
• 5:00 Eurozone ZEW Economic Sentiment. Estimate -23.2. Actual -21.0

Wednesday (December 12)

• 5:00 Eurozone Industrial Production. Estimate 0.2%

*All release times are DST

*Key events are in bold

DAX, Tuesday, December 11 at 7:25 EST

Open: 10,724 Low: 10,838 High: 10,681 Close: 10,834

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