DAX rebounds after tough week

After posting sharp losses last week, the DAX has started the week with gains. On Monday, the DAX is at 11,485, up 0.24% on the day. On the release front, there are no major eurozone events. German industrial production posted a fourth straight decline. The reading of -0.8% missed the forecast of 0.5%. On the DAX, Deutsche Bank has jumped 3.3% on the day, as merger talks between Deutsche Bank and Commerzbank have intensified.

The German manufacturing sector continues to post dismal numbers. Industrial production managed only two gains in the second half of 2018 and has started 2019 with a decline. Last week, factory orders plunged 2.6%, marking a third successive decline. The U.S-China trade war has dampened global growth, which has reduced the demand for German exports and weighed on manufacturing. Eurozone manufacturing has also struggled, and the negative trend is likely to continue if there is no breakthrough in the U.S-China trade talks.

The ECB was more dovish than expected last week, and investors reacted with a thumbs-down. The ECB announced that it was extending its forward guidance on interest rate levels, saying that it would not raise rates before 2020. Although this should not have come as a surprise, the ECB had been on record until now as saying that rates could move higher in late 2019. In an acknowledgment to the slowdown in the eurozone, the ECB announced a new round of long-term loans to eurozone banks and slashed the 2019 GDP forecast for the bloc to 1.1%, down from 1.7% in the previous forecast. Mario Draghi reinforced the bank’s dovish stance in his press conference, saying that risk was pointed to the downside, although a recession was unlikely.

Trade trembles and Brexit bumbling start the week

Brexit and sterling volatility expected

Economic Calendar

Monday (March 11)

• 3:00 German Industrial Production. Estimate 0.5%. Actual -0.8%
• 3:00 German Trade Balance. Estimate 21.2B. Actual 18.5B
• All Day – Eurogroup Meetings

*All release times are DST

*Key events are in bold

DAX, Monday, March 11 at 8:25 EST

Previous Close: 11,457 Open: 11,491 Low: 11,462 High: 11,508 Close: 11,485

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