DAX jumps on optimism over US-China talks

The swings in the equity markets continue, with the DAX posting strong gains in Friday’s Asian session,. after losses on Thursday. Currently, the index is at 10,558, up 1.36% since the Thursday close. On the release front, German and eurozone indicators disappointed. German and eurozone services PMIs both slipped in December and missed their estimates. CPI Flash Estimate fell to 1.6%, down from 2.0% in the previous release. This was shy of the estimate of 1.8%. In the U.S., the markets are expecting gains from nonfarm payrolls. On Thursday, ADP nonfarm payrolls surged to 271 thousand, crushing the estimate of 179 thousand. If nonfarm payrolls also beat expectations, the markets will likely respond with gains.

It was an abbreviated holiday week, but that didn’t prevent the euro from plunging on Wednesday, when the currency fell over 1%. The catalyst for the slide was a stunning announcement from Apple, which cut its sales forecast for this quarter, blaming a drop in sales of iPhones in China. This was more negative fodder for investors, who are increasingly worried about the economic toll of the ongoing U.S-China trade war, which is has already caused a slowdown in China. The Apple announcement panicked investors, sending global markets sharply lower. However, the markets have reversed directions on Friday, as there is renewed confidence ahead of the U.S-China trade talks next week.

The markets will be paying close attention to remarks on Friday from Fed Chair Jerome Powell, who will participate in a panel discussion in Atlanta. The Fed faced criticism for its overly hawkish rate statement at the December meeting, when the Fed raised rates for the fourth time in 2018. The statement unnerved investors and contributed to sharp losses in the equity markets. Powell may use this opportunity to reassure investors by sending a dovish message. The Fed is currently forecasting two rate hikes next year, but many analysts are concerned that continuing to tighten policy when there are signs of an economic slowdown could be a serious mistake.

More of the same in Asian session

Markets bounce ahead of jobs report and Powell

Economic Calendar

Friday (January 4)

• 3:55 German Final Services PMI. Estimate 52.5. Actual 51.8
• 3:55 German Unemployment Change. Estimate -12K. Actual -14K
• 4:00 Eurozone Final Services PMI. Estimate 51.4. Actual 51.2
• 5:00 Eurozone CPI Flash Estimate. Estimate 1.8%. Actual 1.6%
  
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%. Actual 1.0%
  
• 5:00 Eurozone PPI. Estimate -0.2%. Actual -0.3%
• 8:30 US Nonfarm Employment Change. Estimate 179K
• 10:15 US Fed Chair Powell Speaks

*All release times are DST

*Key events are in bold

DAX, Friday, January 4 at 6:55 EST

Previous Close: 10,416 Open: 10,526 Low: 10,483 High: 10,601 Close: 10,558

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