DAX slips on U.S-China concerns

The DAX index has posted considerable losses in the Thursday session. Currently, the index is at 12,505, down 0.45% on the day. Earlier in the day, the DAX was more than 1.0 percent lower. In economic news, German Preliminary CPI is expected to dip to 0.1%. On Friday, Germany releases retail sales and the eurozone publishes CPI Estimate.

Inflation will be in focus for the rest of the week, and the strength of the data could determine the direction of German stock markets. The markets are braced for a weak gain of 0.1% from German Preliminary CPI, but Eurozone CPI Flash Estimate is expected to post a second straight gain of 2.1%. The indicator has climbed sharply in the second half of 2018 – back in May, CPI came in at 1.2%.

The U.S-China trade spat remains unresolved, as low-level talks between the sides last week proved inconclusive. The sides have swapped tariffs against each other, and unless there is some significant progress, the U.S will impose further tariffs on some $200 billion in Chinese products. With China likely to retaliate in kind, this would mark a major escalation in the trade war and could dampen risk appetite and weigh on the equity markets.

It has been a rough August for the DAX, which has dropped 2.2%. Still, with the ECB unlikely to raise interest rates in the near future, investors may prefer the equity markets over the euro. The currency was last above the 1.20 line in May, and this symbolic level could remain elusive for quite some time. The reason? Mario Draghi and his ECB colleagues continue to send out the message that the ECB has no plans to raise rates until after the summer of 2019. The markets are not expecting a rate hike before October 2019, which means that the euro is not particularly attractive unless there is an unexpected improvement in the German and eurozone economies.

Economic Calendar

Thursday (August 30)

• 2:00 German Import Prices. Estimate 0.0%. Actual -0.2%
• All Day – German Preliminary CPI. Estimate 0.1%
• 3:55 German Unemployment Change. Estimate -8K. Actual -8
• 13:30 German Buba President Weidmann Speaks

Friday (August 31)

• 2:00 German Retail Sales. Estimate -0.2%
• 5:00 Eurozone CPI Flash Estimate. Estimate 2.1%
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.1%
• 5:00 Eurozone Unemployment Rate. Estimate 8.2%

*All release times are DST

*Key events are in bold

DAX, Thursday, August 30 at 6:40 DST

Previous Close: 12,527 Open: 12,551 Low: 12,498 High: 12,566 Close: 12,505

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