Downgrade to German growth sends DAX to 3-week low

The DAX index has steadied on Wednesday, after declining 1.6% on Tuesday. Currently, the DAX is at 12,089, down 0.03% on the day. In economic news, German industrial production came in at 0.5%, much stronger than the estimate of -0.5%. Later in the day, the ECB releases the minutes of its April policy meeting.

Investors pulled the plug on European stock markets on Tuesday, in response to a report from the EU, which slashed the 2019 growth outlook for Germany. In February, the EU projected growth of 1.1%, but this has been drastically cut to 0.5%. The downgrade for the eurozone was minor, from 1.5% to 1.4%. The EU noted that the downside risks to the eurozone remain “prominent”, and noted that deadlines for the U.S-China trade talks and Brexit had come and passed, leaving significant uncertainty about the economic outlook. The report warned that “an escalation of trade tensions could prove to be a major shock.” The weak German forecast and pessimistic tone of the report unnerved investors, as the DAX posted its biggest one-day decline since mid-April.

Adding to the DAX’s woes this week was an escalation in trade tensions between China and the U.S. On Sunday, Trump said that the U.S. would raise tariffs on $200 billion worth of Chinese goods as early as Friday, from 10% to 25%. Chinese officials had said it would cancel the talks, but this turned out to be an empty threat. Chinese Vice Premier Liu He is scheduled to lead a Chinese delegation to Washington. Will the new U.S. tariffs be rescinded? Treasury Secretary Steve Munchin said that the tariffs could be cancelled when the talks resume. Such a move would restore investor confidence and could trigger a rebound on the stock markets, after a very rough start to the week.

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Economic Calendar

Wednesday (May 8)

  • 2:00 German Industrial Production. Estimate -0.5%. Actual 0.5%
  • 7:30 ECB Monetary Policy Meeting Accounts

*All release times are DST

*Key events are in bold

DAX, Wednesday, May 8 at 7:20 DST

Previous Close: 12,092 Open: 12,092 Low: 12,063 High: 12,182 Close: 12,091

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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, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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