The DAX index has posted slight losses in the Monday session. Currently, the DAX is at 12,845, down 0.18% on the day. On the release front, today’s key event is German Preliminary CPI, which is expected to climb to 0.4%. Investors will be keeping a close eye on Tuesday’s indicators. Germany releases retail sales and the eurozone publishes CPI and GDP reports.
The DAX had one its best weeks of the year, climbing 2.8 percent and touching its highest level since mid-June. Investors responded positively to a meeting between EU Commission President Jean-Claude Juckner and U.S. President Trump that went better than expected. The two leaders agreed to take concrete steps to eliminate tariffs and improve the trade relationship between the U.S and the EU, which has been battered in recent weeks. Most importantly, Trump agreed to hold off on threatened tariffs against European car manufacturers, which pushed car manufacturers and bank shares higher and boosted the DAX.
It was more of the same from the ECB, which maintained its monetary policy at its Thursday policy meeting. The main refinancing rate remained at 0.0%, where it has been pegged since January 2016. In a policy statement, policymakers reiterated that rates would remain at current levels “through the summer of 2019”, and “as long as necessary to boost inflation to the target of just under 2.0%. There has been some quibbling among analysts as to the exact meaning of “through the summer”, but what is clear is that the ECB plans to keep rates at a flat 0.00% after winding up its bond-purchase scheme at the end of the year. Low interest rates are bullish for stocks, and the DAX responded with gains on Thursday after the ECB statement. Still, a rate hike seems likely sometime in 2019. The exact timing of a rate increase will depend on the strength of the eurozone economy and inflation levels – if the second half of 2018 is marked by stronger growth and higher inflation, there will be pressure on the ECB to raise rates earlier rather than later in 2019.
Economic Calendar
Monday (July 30)
- All Day – German Preliminary CPI. Estimate 0.4%
Tuesday (July 31)
- 2:00 German Retail Sales. Estimate 1.1%
- 3:55 German Unemployment Change. Estimate -10K
- 5:00 Eurozone CPI Flash Estimate. Estimate 2.0%
- 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%
- 5:00 Eurozone Preliminary Flash GDP. Estimate 0.4%
- 5:00 Eurozone Unemployment Rate. Estimate 8.3%
*All release times are DST
*Key events are in bold
DAX, Monday, July 30 at 7:10 DST
Previous Close: 12,860 Open: 12,820 Low: 12,814 High: 12,849 Close: 12,845
