DAX Jumps as New Italian Government, Korea Summit Stokes Optimism

The DAX has posted sharp gains in the Tuesday session. Currently, the DAX is at 12,897, up 0.99% on the day. In economic news, German Final Services PMI dropped to 52.1, matching the forecast. It was a similar story with Eurozone Final Services PMI, which fell to 53.8, just shy of the estimate of 53.9 points. Eurozone retail sales disappointed, posting a weak gain of 0.1% for a third straight month, but missed the estimate of 0.5%.

Investors have given a thumbs up to developments in Italy, as the country finally has a government after months of political drama. The new coalition is made up of two euro-sceptic parties, the League and the Five-Start Movement, which is likely to cause tensions between Rome and the European Union. After President Sergio Matterella vetoed the choice for finance minister last week, it appeared that the country might be headed for another election and more political uncertainty, and Italian stocks and bonds dropped sharply. However, the crisis is over after the prime minister-elect, Giuseppe Conte, found another candidate for the key finance post. The new government has said it will drastically reduce immigration and raise spending, planks which could put it at odds with EU policy. Although the League and Five Star Movement have not issued any threats to withdraw from the EU or even hold a referendum, there is concern that the fourth largest economy in the eurozone is being steered by a government with a populist, anti-establishment platform.

The on-again-off-again Korea nuclear summit is back on, complete with a starting time. The much-heralded meeting between President Trump and President Kim Jong-un will take place in Singapore on June 12, at 9:00 AM sharp. The summit will mark the face ever face-to-face meeting between leaders of the U.S and North Korea, but Trump has tried to lower expectations, saying that he didn’t expect the sides to sign an agreement. Rather, the meeting would mark the start of a process. North Korea is unlikely to agree to denuclearization, but the fact that the two sides are talking is likely to continue boosting the stock markets.

Economic Calendar

Tuesday (June 5)

• 3:55 German Final Services PMI. Estimate 52.1. Actual 52.1
• 4:00 Eurozone Final Services PMI. Estimate 53.9. Actual 53.8
• 5:00 Eurozone Retail Sales. Estimate 0.5%. Actual 0.1%
• 13:30 German Buba President Weidmann Speaks

*All release times are DST

*Key events are in bold

DAX, Tuesday, June 5 at 6:40 DST

Previous Close: 12,770 Open: 12,758 Low: 12,744 High: 12,907 Close: 12,897

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