DAX Remains Subdued in Thin Trading

The DAX is showing little movement in the shortened trading week. Currently, the index is at 13,057.07, down 0.14% on the day. The sole event is the ECB Economic Bulletin, which comes two weeks after the December ECB policy meeting. On Friday, Germany releases Final CPI.

Christmas week is light on eurozone economic releases, so the markets will be paying close attention to German Preliminary CPI, which will be released on Friday. The indicator rose 0.3% in November, marking a 4-month gain. The markets are expecting a gain of 0.5% for December. In the eurozone, annual average inflation inched up to 1.5% in November, up from 1.4% in October. This marked a multi-year high. Earlier this month, in a nod to stronger economic activity in 2017, the ECB raised its forecasts for growth and inflation for the eurozone from this year through to 2019. Still, inflation remains well below the ECB target of around 2.0%, and ECB policymakers are unlikely to announce an end to their stimulus package until inflation moves closer to the 2.0% target.

Stronger economic conditions in Germany and the eurozone economy have boosted European stock markets in 2017, and the DAX has responded with strong annual gains of 13.8%. So far, fourth quarter numbers in Germany and the eurozone have been solid, and expectations are that the positive trend will continue into 2018, which bodes well for the DAX.

With the US economy expanding above 3% in the third quarter, the Federal Reserve remains on track for another rate hike in January. The CME Group has pegged the odds of a January hike at 100%, which could give a boost to the US dollar. If the economy continues its impressive pace of growth above 3%, the Fed could raise rates up to four times in 2018. Despite strong economic conditions, the Federal Reserve’s inflation target of 2.0% remains elusive. Fed Chair Janet Yellen and other FOMC members have said that they expect that the strong labor market will lead to higher inflation. Although this is yet to materialize, of significance to the markets is the commitment of the Fed to press ahead with rate hikes despite low inflation.

Economic Calendar

Thursday (December 28)

• 4:00 ECB Economic Bulletin

Friday (December 29)

• All Day – German Preliminary CPI. Estimate 0.5%
• 4:00 Eurozone M3 Money Supply. Estimate 4.9%

*All release times are GMT

*Key events are in bold

DAX, Wednesday, December 27 at 6:10 EDT

Open: 13,064.50 High: 13,069.50 Low: 13,032.50 Close: 13,040.75

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