Financial Stocks Pull DAX Downwards

The DAX index has posted sharp losses in the Wednesday session. Currently, the DAX is at 12,862.50, down 1.31% on the day. On the release front, the eurozone trade surplus jumped to EUR 25.0 billion, above the estimate of EUR 21.2 billion. It’s a busy day in the US, with the focus on consumer data. CPI is expected to come in at 0.1% and Core CPI at 0.2%. Consumer spending is also expected to post low numbers, with the estimate for Retail Sales at 0.2% and Core Retail Sales at 0.0%.

It’s been a dismal November for the DAX, which has declined 3.6%. The index has posted six straight losing sessions and is at its lowest level since October 2. The downward trend has intensified on Wednesday, as financial stocks have dragged the index lower. Commerzbank is down 3.90%, while Deutsche Bank has declined 2.85% on the day.

Germany’s economy continues to fire on all cylinders, and jumped to 0.8% in the third quarter, recording its strongest quarter since 2014. Germany’s economy is growing at annualized rate of 2.8% in 2017. The catalyst for the strong reading was an increase in business investment, as sales of machinery and equipment increased. German fundamentals remain strong, as business and consumer confidence is high and unemployment remains at record-low levels. However, the positive economic conditions have failed to trigger much inflation, which has been a problem throughout the eurozone. German Final CPI dripped to 0.0% in October, the first time inflation has not moved higher since May. Germany has been the locomotive for the euorozone, and boosted traditional laggards such as France and Italy.

The heads of central banks met on Tuesday at an ECB event, with a focus on communication with the markets and the public. Federal Reserve Chair Janet Yellen acknowledged that the FOMC committee of 19 members posed problems, as members did not always speak with a unified voice. This led to the markets picking up on differences between policymakers, often leading to market volatility. Yellen admitted that this problem would not be solved anytime soon, saying it was “a work in progress”. To be fair, this is also an issue for the ECB, as the markets have on occasion reacted to comments from individual policymakers regarding monetary policy or quantitative easing.

Economic Calendar

Wednesday (November 15)

• 5:00 Eurozone Trade Balance. Estimate 21.2B. Actual 25.0B
• Tentative – German 10-year Bond Auction
• 8:30 US CPI. Estimate 0.1%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Retail Sales. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.0%

Thursday (November 16)

• 5:00 Eurozone Final CPI. Estimate 1.4%
• 5:00 Eurozone Final Core CPI. Estimate 0.9%

*All release times are GMT

*Key events are in bold

DAX, Wednesday, November 15 at 5:40 EDT

Open: 12,968.00 High: 12,969.50 Low: 12,848.00 Close: 12,862.50

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