DAX Slips on Concerns over Possible ECB Stimulus Extension

The DAX index has recorded considerable losses in the Tuesday session, after posting gains for two straight sessions. Currently, the DAX is at 12,875 points, down 0.56% on the day. On the release front, Germany indicators were solid, as Industrial Production and Trade Balance both beat their estimates. Later in the day, US President Trump will announce whether he will pull the US out of the Iran nuclear agreement.

Germany has posted some soft numbers recently, which could have major ramifications for ECB fiscal policy. The ECB cut its stimulus package at the start of the year from EUR 60 billion to 30 billion, while at the same time it extended the program to September. However, soft eurozone numbers, especially in Germany, have raised concerns that the bank may decide to again extend stimulus into 2019. German Factory Orders posted a second decline in the past three months, and the most recent PMIs in the services and manufacturing sectors also headed lower. On Tuesday, German indicators bounced back after a weak start to the week. Industrial Production climbed 1.0%, beating the estimate of 0.8% and ending a nasty streak of three straight declines. As well, Germany posted a trade surplus of EUR 22.0 billion, easily beating the estimate of EUR 19.9 billion. This marked a 4-month high.

The Federal Reserve’s newest regional Fed president, Thomas Barkin, delivered a major speech on Monday, and his tone was decidedly upbeat. Barkin said that the economy is “remarkably strong: above-trend growth, low unemployment, inflation at target”. Barkin added that although the labor market is strong, it is not causing pressure on wages, but low unemployment should lead to an increase in inflationary pressures. As for upcoming rate increases, Barkin was careful to remain mum on how many rate hikes he expects this year. The Fed raised rates in March by a quarter-point and continues to forecast two additional increases this year. However, some policymakers are calling for three more hikes, given the strong health of the US economy.

Italian Politics Weighs on the Euro

Markets Caught Between Opposing Forces

Economic Fundamentals

Tuesday (May 8)

• 2:00 German Industrial Production. Estimate 0.8%. Actual 1.0%
• 2:00 German Trade Balance. Estimate 19.9B. Actual 22.0B
• 14:00 US President Trump Speaks

*All release times are DST

*Key events are in bold

DAX, Tuesday, May 8 at 6:55 DST

Prev. Close: 12,948 Open: 12,931 Low: 12,858 High: 12,935 Close: 12,875

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