DAX starts off 2019 in style, but will China spoil the party?

The DAX index lost ground over the weekend, but has steadied in the Monday session. Currently, the index is at 10,816, down 0.49% since the close on Friday. On the release front, German and eurozone data disappointed. German WPI surprised with a decline of 1.2%, its weakest reading since December 2008. Eurozone industrial production fell 1.6%, much worse than the forecast of a 0.3% gain. On Tuesday, ECB President Draghi will testify about the ECB Annual Report.

With investors showing stronger risk appetite, the DAX has enjoyed a strong January, with gains of 3.4 percent. This is a far cry from the December meltdown of 8.4 percent, as equity markets try to shake off an awful 2018. Still, there are dark clouds on the horizon. The eurozone economy has slowed down, and weaker economic activity in China could spook investors. On Monday, China released dismal economic numbers, with exports down 4.4 percent from a year earlier and imports plunging 7.6 percent. The slowdown in China has taken a toll on corporate profits, with Apple and Jaguar Land Rover posting revenue warnings.

The ongoing global trade war continues to hamper manufacturing sectors across the eurozone. Last week, industrial production in Italy fell by 1.6% in November and in France the drop was 1.3%. The alarming trend continued on Monday, as eurozone industrial production declined 1.6%. Germany, the locomotive of the bloc, is also in trouble, in which industrial production has slipped for three straight months. With the three largest economies in the eurozone showing signs of weakness, conditions may not warrant any rate increases in the foreseeable future. The ECB winded up its stimulus program last month, and had expressed plans to raise rates later this year, but this will require stronger economic conditions in the eurozone.

Economic Calendar

Monday (January 14)

  • 2:00 German WPI. Estimate 0.3%. Actual -1.2%
  • 5:00 Eurozone Industrial Production. Estimate 0.3%. Actual -1.7%

Tuesday (January 15)

  • 5:00 Eurozone Trade Balance. Estimate 13.2B
  • 10:00 ECB President Draghi Speaks

*All release times are DST

*Key events are in bold

DAX, Monday, January 14 at 7:55 EST

Previous Close: 10,887 Open: 10,813 Low: 10,785 High: 10,856 Close: 10,833

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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