The DAX has ticked lower in the Thursday session. Currently, the DAX is at 11,473, down 0.12% on the day. In economic news, the focus is on German CPI, which is expected to rebound with a gain of 0.5%. On Friday, Germany releases retail sales and manufacturing PMI, while the eurozone releases CPI estimates.
It is becoming increasingly clear that the equity markets won’t have to worry about the Federal Reserve raising rates anytime soon. With the Fed staying pat, investors will be less attracted to the greenback, which is good news for stock markets. Looking at the ECB, the bank finally terminated its massive stimulus program, but any speculation that the bank will raise rates in the near term appears remote.
The ECB has held rates at a flat 0.00% since March 2016, and there are two main factors weighing on a rate hike. First, the eurozone economy is grappling with a slowdown, and the German locomotive has also posted sluggish numbers. As well, inflation levels remain well shy of the ECB target of 2%. Unless the economic conditions show a sharp improvement, we may not see a rate hike before 2020.
After an aggressive 2018, when the Fed hiked rates four times, the Fed is yet to make a move in 2019. The dovish stance was reinforced by Fed Chair Powell’s testimony on Capitol Hill on Tuesday and Wednesday. Powell preached patience with regard to changes in interest rate levels. The Fed chair stated that the Fed was in “no rush to make a judgment” and made reference to “conflicting signals in the economy”.
The labor picture remains bright, with strong hiring and low unemployment. At the same time, consumer spending and business investment have been soft. Powell was optimistic about the U.S. economy, but said that the lower global growth and uncertainty over trade was weighing on the economy. The markets are expecting the Fed to remain on the sidelines in May and June, meaning that the first hike of 2019 may be on hold until the second half of the year.
Economic Calendar
Thursday (February 28)
- 2:00 German Import Prices. Estimate 0.2%. Actual -0.2%
- All Day – German Preliminary CPI. Estimate 0.5%
Friday (March 1)
- 2:00 German Retail Sales. Estimate 1.9%
- 3:55 German Final Manufacturing PMI. Estimate 47.6
- 3:55 German Unemployment Change. Estimate -5K
- 4:00 Eurozone Final Manufacturing PMI. Estimate 49.2
- 5:00 Eurozone CPI Flash Estimate. Estimate 1.5%
- 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.1%
*All release times are DST
*Key events are in bold
DAX, Thursday, February 28 at 8:40 EST
Previous Close: 11,487 Open: 11,412 Low: 11,409 High: 11,487 Close: 11,473