DAX jumps as investors remain hopeful on US-China trade rift

The DAX has posted strong gains in the Friday session. Currently, the DAX is at 11,192, up 0.92% on the day. It’s a light day on the fundamental calendar, with no major releases. The eurozone trade surplus widened to EUR 15.6 billion, matching the estimate.

Economic growth in Germany and the eurozone has slowed, as underscored by disappointing GDP numbers this week. Nonetheless, investors remain optimistic, as the DAX has posted strong gains of 2.4% this week, erasing the losses from the previous week. German Preliminary GDP was flat at 0.0% in the fourth quarter, after a decline of 0.2% in the third quarter. The eurozone’s largest economy managed to avoid a technical recession, which is two consecutive declines in quarterly growth. Germany’s manufacturing industry is limping, with factory orders and industry production posting declines in December. Eurozone Flash GDP remained stuck at 0.2% in Q4, shy of the forecast of 0.3%. On an annualized basis, fourth quarter growth was 0.9% in Germany and 1.2% in eurozone, both weaker than the third quarter numbers. If eurozone and German data remains soft in the first quarter, the DAX could lose ground.

The trade conflict between the U.S. and China has taken a toll on global growth and world stock markets, but investors are feeling more optimistic. A third round of talks ended in Beijing on Thursday, with Treasury Secretary Mnuchin calling the negotiations “productive”. Still, with no breakthrough in the offing, the big question is will President Trump suspend the March 1 deadline to impose new tariffs on China. The U.S. has threatened to raise tariffs on some $200 billion of Chinese goods from 10% to 25%, but Trump has said he could let the deadline pass if there is progress in the talks. On Thursday, China announced that exports had jumped 9.1% in January on an annualized basis, compared to the forecast of -3.2%. This was a strong rebound from December, when exports fell 4.4%.

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EUR/USD Fundamentals

Friday (February 15)

• 5:00 Eurozone Trade Balance. Estimate 15.6B. Actual 15.6B
  

*All release times are DST

*Key events are in bold

DAX, Friday, February 15 at 6:25 EST

Previous Close: 11,089 Open: 11,041 Low: 11,017 High: 11,196 Close: 11,192

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