DAX slips as German growth falls to 5-year low

The DAX index has posted sharp losses in the Tuesday session. Currently, the index is at 10,861, down 0.85% on the day. On the release front, eurozone trade surplus jumped to EUR 15.1 billion, a 3-month high. This easily beat the estimate of EUR 13.2 billion. Later in the day, ECB President Draghi testifies about the ECB Annual Report. On Wednesday, Germany publishes Final CPI.

Germany’s economic data is closely watched, as the economy is a bellwether not just for the eurozone, but for the global economy as well. Germany has not yet released GDP data for the fourth quarter, but officials have reported that it will be a ‘slight gain’. The German economy grew 1.5% in 2018, the lowest level of growth since 2013. A key reason for the weak expansion is the ongoing global trade war, which has taken a bite out the export sector and dampened manufacturing activity. German Industrial production has fallen for three successive months, and eurozone industrial production is also pointing downwards.

On the bright side, German unemployment is at record lows and domestic demand has remained strong. The ECB winded up its stimulus program last month and had expressed plans to raise rates later this year. However, this is unlikely to happen unless economic conditions improve the eurozone.

With investors showing stronger risk appetite, the DAX has enjoyed a strong January, with gains of 3.7 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.

Economic Calendar

Tuesday (January 15)

  • 5:00 Eurozone Trade Balance. Estimate 13.2B. Actual 15.1B
  • 10:00 ECB President Draghi Speaks

Wednesday (January 16)

  • 2:00 German Final CPI. Estimate 0.1%
  • Tentative – German 30-year Bond Auction

*All release times are DST

*Key events are in bold

DAX, Tuesday, January 16 at 6:25 EST

Previous Close: 10,855 Open: 10,963 Low: 10,853 High: 10,994 Close: 10,861

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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.