DAX rally continues as U.S-China trade tensions ease

The DAX index has climbed sharply in the Friday session. Currently, the DAX is trading at 11,639, up 1.48% since the close on Thursday. On the release front, German and eurozone manufacturing PMIs softened in October, but were within expectations. In the U.S, nonfarm payrolls are expected to climb sharply to 194 thousand.

After a brutal October, the DAX has rebounded with gains at the start of November. The DAX plunged 6.7% in October, its worst monthly performance since December 2016. However, the picture has brightened considerably, with the DAX climbing 3.2 this week. Asian equity markets posted strong gains on Friday, buoyed by a report that U.S President Trump is working on a trade agreement with China, which Trump will present to Chinese President Xi Jinping at a Group of 20 summit in Argentina later this month. The unpredictable Trump took a hard line on China earlier in the week, threatening to impose stiff tariffs on all Chinese imports if his meeting with Xi was not successful. This could mean that we are in store for plenty of volatility in the stock markets in November.

Is the German manufacturing sector in trouble? Manufacturing slowed for a third straight month in October, as the slowdown has now entered the fourth quarter. The October Manufacturing PMI dipped to  52.2, down from 53.7 points in September. The reading, which points to limited expansion, is the lowest since May 2016. The weak data can be directly attributed to global trade tensions, which have dampened the German export sector. China is Germany’s third largest export market, and a slowdown in China due to U.S trade tariffs could have a chilling effect on the German economy. The German central bank is forecasting zero growth in the third quarter, and growth in the eurozone also softened in the third quarter. Eurozone GDP posted a weak gain of 0.2% in the third quarter, down from the 0.4% gain in the second quarter. On an annualized basis, eurozone growth slipped to 1.7% in Q3, down from 2.1% in Q2.

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Economic Calendar

Friday (November 2)

• 3:00 German Import Prices. Estimate 0.4%. Actual 0.4%
• 4:55 German Final Manufacturing PMI. Estimate 52.3. Actual 52.2
• 5:00 Eurozone Final Manufacturing PMI. Estimate 52.1. Actual 52.0
• 8:30 US Nonfarm Employment Change. Estimate 194K

*All release times are DST

*Key events are in bold

DAX, Friday, November 2 at 6:40 DST

Open: 11,468 Low: 11,638 High: 11,650 Close: 11,638

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