DAX pauses after gains, as weak manufacturing data raising concerns

The DAX index has edged lower in the Friday session. Currently, the index is at 10,891, down 0.27% since the close on Thursday. On the release front, Italian industrial production declined by 1.6%, well short of the estimate of -0.3%.

The global trade war has led to less demand for European exports, which in turn has weighed heavily on the manufacturing industry. Industrial production in Italy fell by 1.6% in November and in France the drop was 1.3%. The biggest worry is over Germany, where industrial production has slipped for three straight months. With the three largest economies in the eurozone in trouble, conditions may not warrant any rate increases in the foreseeable future. The ECB winded up its stimulus program last month, and had expressed plans to raise rates later this year, but this will depend on the strength of the eurozone economy.

After weeks of turmoil in the equity markets, risk appetite has returned and steadied the markets. The Fed has made a sharp U-turn since the December rate hike and is sounding much more cautious about future rate hikes. The minutes noted low inflation meant that the Fed can “afford to be patient about further policy firming”. Even more striking, the minutes revealed that at the December meeting, some policymakers opposed a rate hike, arguing that inflation was too low to warrant higher rates. The new dovish stance from the Fed has relieved investors and helped stabilize the stock markets, with 2018 being the worst year in a decade for equity markets.

Economic Calendar

Friday (January 11)

• 4:00 Italian Industrial Production. Actual -1.6%

*All release times are DST

*Key events are in bold

DAX, Friday, January 11 at 6:40 EST

Previous Close: 10,921 Open: 10,950 Low: 10,892 High: 10,959 Close: 10,891

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