DAX Under Pressure Despite Strong German Releases

The DAX index has posted slight losses in the Tuesday session. Currently, the index is trading at 12,362.98, down 0.19% since the Monday close. On the release front, German and eurozone confidence reports for February beat the estimates, but slowed compared to the January releases. German ZEW Economic Sentiment came in at 17.8, beating the estimate of 16.0 points. Eurozone ZEW Economic Sentiment dropped to 29.3, above the estimate of 28.4. German PPI improved to 0.5%, above the estimate of 0.3%. This marked the strongest reading since January 2017. On Wednesday, Germany and the eurozone release manufacturing PMIs. In the US, the Federal Reserve will release the minutes of its January meeting.

The recent turbulence in global stock markets have sent the DAX lower, and the index has shed 5.9% in February. However, the index rebounded last week, posting a winning week for the first time since mid-January. The catalyst for the gains were positive corporate earnings in Europe. The US recently passed massive corporate and individual tax reform, worth $1.5 trillion. This could significantly boost earnings in Q1 of 2018 for European companies which have major operations in the US, such as banking giants Deutsche Bank and Commerzbank, which are listed on the DAX.

The recent turbulence in the global stock markets has triggered strong volatility in the currency markets, and ECB President Mario Draghi recently stated that the ECB was concerned about the euro’s sharp fluctuations. Last week, Draghi weighed in on Bitcoin, a cryptocurrency which has seen wild fluctuations in recent months. There are growing calls for regulation of these currencies, and central banks could play a key role in such regulation. However, Draghi poured cold water on any ECB involvement, saying that it was not the ECB’s responsibility to ban or regulate Bitcoin. Draghi added that the ECB was exploring the use of blockchain, a digital technology to monitor bitcoin transactions.  France and Germany want to cryptocurrencies on the agenda at the next G-20 meeting, and there is bipartisan support in Congress to adopt new rules to regulate virtual currencies.

Economic Calendar

Tuesday (February 20)

• 2:00 German PPI. Estimate 0.3%. Actual 0.5%
• 5:00 German ZEW Economic Sentiment. Estimate 16.0. Actual 17.8
• 5:00 Eurozone ZEW Economic Sentiment. Estimate 28.4. Actual 29.3
• All Day – ECOFIN Meetings
• 10:00 Eurozone Consumer Confidence. Estimate 1

Wednesday (February 21)

• 3:30 German Flash Manufacturing PMI. Estimate 60.6
• 4:00 German Flash Services PMI. Estimate 56.9
• 4:00 Eurozone Flash Manufacturing PMI. Estimate 59.2
• 4:00 Eurozone Flash Services PMI. Estimate 57.7
• 14:00 US FOMC Meeting Minutes

*All release times are EST

*Key events are in bold

DAX, Tuesday, February 20 at 6:30 EDT

Open: 12,451.96 High: 12,512.00 Low: 12,426.50 Close: 12,362.98

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