Equity markets continue to be marked by volatility. After sparkling gains on Friday, the DAX has reversed directions on Monday. Currently, the index is at 10,709, down 0.54% since the Friday close. On the release front, German and eurozone retail sales beat their estimates. However, German Factory Orders disappointed, posting its first decline in four months. In the U.S., the sole event is ISM Non-Manufacturing PMI is expected to dip to 59.6 points. On Tuesday, Germany releases Industrial Production.
The New Year has greeted investors with sharp swings in the equity markets. The year started on a dismal note, as Apple shocked the markets when it lowered its sales forecast for this quarter, blaming a drop in sales of iPhones in China. This panicked investors and sent the markets sharply lower.
Risk appetite improved late in the week, after dovish comments from Fed Chair Jerome Powell. Investors were unhappy with the Fed’s December rate statement, which was less dovish than expected, as the Fed said it would continue raising interest rates in 2019. Powell tempered this stance on Thursday with a more cautious outlook over rate policy. He said that he was aware of the risks of a slowdown in the U.S. economy and that the Fed would be patient in its policy decisions. The Fed is currently forecasting two rate hikes next year, but some analysts have forecast a rate cut next year, with the U.S. economy expected to slow down, compared to its torrid pace in 2018. There was more good news for investors on Friday, as U.S. employment numbers were sharp. Nonfarm payrolls jumped to 312 thousand, its highest level since February, while wage growth improved to 0.4%, up from 0.2% in the previous release.
Will investor optimism continue this week? The markets are keeping a close eye on U.S.-China trade talks, which started on Monday in Beijing. With the threat of more U.S tariffs on March 1, negotiators will be under pressure to produce some results after a bruising trade war that has shaken global equity markets and has slowed down the giant Chinese economy. If the sides report any progress, traders can expect the DAX to move higher.
Monday (January 7)
- 2:00 German Factory Orders. Estimate -0.2%. Actual -1.0%
- 2:00 German Retail Sales. Estimate 0.4%. Actual 1.4%
- 4:30 Eurozone Sentix Investor Confidence. Estimate -2.0. Actual -1.5
- 5:00 Eurozone Retail Sales. Estimate 0.2%. Actual 0.6%
Tuesday (January 8)
- 2:00 German Industrial Production. Estimate 0.3%
*All release times are DST
*Key events are in bold
DAX, Monday, January 7 at 7:35 EST
Previous Close: 10,767 Open: 10,836 Low: 10,695 High: 10,836 Close: 10,714
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