DAX – Bank shares jump after Brexit vote

The DAX index posted gains in Wednesday’s Asian session, only to lose these gains in European trade. Currently, the index is at 10,892, up 0.01% since the Tuesday close. On the release front, German Final CPI came in at 0.1% for a second successive month. On Thursday, the eurozone releases Final CPI.

European bank shares have strengthened on Wednesday, after the Brexit vote in the U.K. parliament. Lawmakers turned down the deal by over 200 votes, and the market reaction was that the resounding vote will reduce the likelihood of a no-deal scenario. Deutsche Bank has jumped over 3% on Wednesday and bank listed on the STOXX 600 have also recorded gains.

With the eurozone struggling, there are plenty of headaches for ECB policymakers, and Mario Draghi shared some of his concerns on Tuesday at a plenary session on the ECB annual report. Draghi highlighted Brexit and the U.S-China trade war as significant concerns and noted that eurozone economic conditions have been weaker than expected, adding that the eurozone was undergoing a slowdown but was not heading into recession. The ECB holds its next policy meeting on January 24, with no change in monetary policy expected.

The DAX hasn’t recorded a winning month since July, but that negative trend could change in January. The DAX has rallied in January, with gains of 3.9%. 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 and continues to be a major concern for investors and policymakers.

Economic Calendar

Wednesday (January 16)

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

Thursday (January 17)

  • 5:00 Eurozone Final CPI. Estimate 1.7%
  • 5:00 Eurozone Final Core CPI. Estimate 1.0%

*All release times are DST

*Key events are in bold

DAX, Wednesday, January 16 at 7:50 EST

Previous Close: 10,855 Open: 10,963 Low: 10,853 High: 10,994 Close: 10,891

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

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.