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

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Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.