DAX Rebounds on Stronger German Inflation

The DAX has recorded slight gains on Friday, erasing the losses which marked the Thursday session. Currently, the index is at 13,024.00 up 0.24% on the day. On the release front, German PPI gained 0.3%, beating the estimate of 0.1%. In the eurozone, the current account surplus jumped to EUR 33.3 billion.

The crisis in Catalonia continues, as tensions remains palpably high. The saga continues on Saturday, as the Spanish government is expected to implement Article 155 of the Constitution, which allows for the suspension of Catalonia’s autonomy and direct rule from Madrid. This hard-line approach is in response to the refusal of the Catalan government to comply with a deadline to withdraw its declaration of independence. However, Article 155 has never been triggered before, and it’s not clear what exact measures the central government will take. With emotions near the breaking point, the Spanish government will not want to proceed carefully so as to avoid further unrest. The crisis has already taken an economic toll. Many large companies are moving their headquarters from Barcelona to Madrid and tourism to Catalonia has slipped 15 percent since the crisis began two weeks ago. The Spanish stock market was lower on Thursday, and this dragged down the DAX as well.

Prime Minister Theresa May addressed European Union leaders on Thursday in Brussels. May is hoping to break the deadlock in the talks, but she is facing pressure from some cabinet ministers to simply walk away from Europe. May told the 27 EU leaders that she is confident the two sides can bridge the gaps, but she needs to reach a deal that she can sell back home. One key issue in dispute is the amount of Britain’s exit bill, with the Europeans looking at a bill of EUR 60 billion, and the British reportedly prepared to pay just EUR 20 billion. Other issues with a significant gap include the border with Northern Ireland and the jurisdiction of the European Court of Justice on EU citizens living in Britain. Without some flexibility from both sides, the talks could remain deadlocked and take a toll on European stock markets.

Economic Calendar

Friday (October 20)

• 2:00 German PPI. Estimate 0.1%. Actual 0.3%
• 4:00 Eurozone Current Account. Estimate 26.2B. Actual 33.3B

*All release times are GMT

*Key events are in bold

DAX, Friday, October 20 at 6:25 EDT

Open: 13,048.50 High: 13,062.25 Low: 13,078.25 Close: 13,024.00

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