DAX Improves as US Stock Markets End Week on High Note

The DAX index has gained ground in the Monday session. Currently, the DAX is at 12,878 points, up 0.45% on the day. On the release front, eurozone data disappointed. Germany Factory Orders declined 0.9%, missing the estimate of a 0.5% gain. Eurozone Retail PMI dropped to 48.6, marking the first contraction since March 2017. As well, Eurozone Sentix Investor Confidence dipped to 19.2, well short of the forecast of 21.2 points. This marked a fourth straight drop, as investor concern about the health of the eurozone economy is growing.

Is the German locomotive in trouble? On Monday, German Factory Orders posted a second decline in the past three months, pointing to weakness in the manufacturing sector. The markets will be hoping for better news from Industrial Production on Tuesday, with an estimate of 0.8%. The indicator has posted three straight declines. Last week’s PMI reports also disappointed. German Services PMI was the weakest since September 2016, and the eurozone reading also softened compared to March. This points to weaker expansion in services business activity, another indication of weaker eurozone growth in the first quarter of 2018. German numbers are raising concerns about the strength of the eurozone’s largest economy. Manufacturing PMI weakened for a fourth consecutive month in April, and retail sales posted a fourth straight decline.

US employment numbers were mixed on Friday, but US stock markets moved higher, and the positive sentiment has European markets in green territory on Monday. In the US, nonfarm payrolls rebounded with a gain of 164 thousand, although this fell short of the estimate of 190 thousand. Wage growth remained dropped from 0.3% to 0.1%, missing the estimate of 0.2 percent. There was some good news from the unemployment rate, which dropped to 3.9%, beating the estimate of 4.1%. The Fed will likely be pleased that nonfarm payrolls were not red hot, as they April report justifies its policy of gradual rate hikes.

Economic Fundamentals

Monday (May 7)

• 2:00 Germany Factory Orders. Estimate 0.5%. Actual -0.9%
• 4:10 Eurozone Retail PMI. Actual 48.6
• 4:30 Eurozone Sentix Investor Confidence. Estimate 21.2. Actual 19.2
• 8:25 US FOMC Member Raphael Bostic Speaks
• 14:00 US FOMC Member Thomas Barkin Speaks
• Tentative – US Loan Officer Survey
• 15:00 US Consumer Credit. Estimate 16.2B

Tuesday (May 8)

• 2:00 German Industrial Production. Estimate 0.8%
• 2:00 German Trade Balance. Estimate 19.9B

*All release times are DST

*Key events are in bold

DAX, Monday, May 7 at 7:00 DST

Prev. Close: 12,819 Open: 12,824 Low: 12,813 High: 12,876 Close: 12,878

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