DAX drops despite strong Eurozone CPI

The DAX index has edged lower in the Friday session. Currently, the DAX is trading at 11,390, down 0.29% on the day. The focus on Friday is on inflation numbers. Germany’s Wholesale Price Index dipped from 0.4% to 0.3% in October, but still beat the estimate of 0.2%. In the eurozone, Final CPI and Final Core CPI both improved in October, with readings of 2.2% and 1.1%, respectively.

The DAX has had a dismal week, posting losses of 1.80 percent. Risk appetite soured this week after Germany reported that GDP in the third quarter had declined 0.2%, marking the first contraction in GDP since 2015. German officials put a spin on the weak release, saying that the contraction was largely due to weakness in the auto sector as a result of new pollution standards. In truth, it’s likely that the skid is also due to the global trade war, which has also resulted in U.S. tariffs on European products. Another alarm signal is weak investor confidence. German ZEW Economic Sentiment posted a second straight soft release for November, with a reading of -24.1 points. This points to deep pessimism on the part of institutional investors and analysts. The ZEW added that investors did not expect a rapid recovery from the current weakness, and if is the prevailing sentiment among investors, more headwinds could be in store for European equity markets.

Are Rome and Brussels on a collision course? The crisis over the Italian budget continues, as Rome missed a deadline from the European Commission to revise its draft budget. The Italian government said it would stick to its deficit target of 2.4%, which is within EU fiscal rules. For its part, the EU argues that the deficit target could reach 3.1% in 2020, which would breach the rules. With the ball in the EU court, what happens next? The EU could respond with financial sanctions, known as an excessive deficit procedure, which would amount to billions of euros. As the third largest economy in the eurozone, Italy’s challenge to the EU could have repercussions for the entire bloc, as officials in Brussels scramble to respond to the salvo fired by Rome.

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Economic Calendar

Friday (November 16)

  • 2:00 German WPI. Estimate 0.2%. Actual 0.3%
  • 3:30 ECB President Draghi Speaks
  • 5:00 Eurozone Final CPI. Estimate 2.2%. Actual 2.2% 
  • 5:00 Eurozone Final Core CPI. Estimate 1.1%. Actual 1.1%
  • 8:00 German Buba President Weidmann Speaks

*All release times are DST

*Key events are in bold

DAX, Friday, November 16 at 5:25 EST

Open: 11,425 Low: 11,448 High: 11,388 Close: 11,392

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