DAX plunges as China threatens to curb rate metal supply

The DAX has posted sharp losses in the Wednesday session. Currently, the index is at 11,869, down 1.30% on the day. On the release front, German unemployment rolls climbed by 60 thousand, much higher than the estimate of -8 thousand. The ECB released its financial stability report, which is published twice a year. On Tuesday, the U.S. releases its second estimate of GDP for the first quarter.

Reports that China has raised the ante in a bitter trade dispute have rocked global equity markets. Chinese media has reported that China is threatening to curb the supply of rate metals to the U.S. These products are used in the production of items such as cell phones and electric cars, so any interruption in supply could hurt U.S. technology companies. The DAX has fallen sharply on the news, with bank and automakers stocks heading lower. Deutsche Bank has dropped 1.9%, while Daimler, BMW and Volkswagen have declined around 1.0%. May has been a dreadful month for the blue-chip DAX, which has declined 3.6%.

The ongoing trade war between the U.S. and China shows no signs of ending anytime soon, and this has weighed on investor risk appetite. A weak consumer confidence release out of Germany hasn’t helped matters. Consumer confidence took a hit in May, as GfK Consumer Climate slipped to 10.1 points, down from 10.4 in April. This was the lowest score since April 2017. With the escalation in U.S-China trade tensions, there is no end in sight to the tariffs which have been imposed on European goods, which has dampened consumer confidence. We’ll get a look at the health of consumer spending on Thursday, when Germany releases retail sales. After a decline of 0.2% in April, the markets are expecting a rebound in May, with a forecast of 0.4%.

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Economic Calendar

Wednesday (May 29)

• 3:00 German Buba President Weidmann Speaks
• 3:55 German Unemployment Change. Estimate -8K. Actual 60K
• 4:00 ECB Financial Stability Review

Thursday (May 30)

• 8:30 US Preliminary GDP. Estimate 3.1%

*All release times are DST

*Key events are in bold

DAX, Wednesday, May 29 at 6:10 DST

Previous Close: 12,027 Open: 11,914 Low: 11,848 High: 11,926 Close: 11,865

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