DAX shrugs off soft German, eurozone PMIs

The DAX index is showing little movement in the Thursday session. Currently, the pair is trading at 12,393, up 0.06% on the day. On the release front, manufacturing PMIs in Germany and the eurozone softened in July and missed their estimates. It’s Day 1 of the Jackson Hole Symposium, a gathering of the heads of major central banks. On Friday, Germany releases Final GDP and Federal Reserve Chair Jerome Powell will speak at Jackson Hole.

Global trade war tensions, as well as political worries over Italy have dampened the economic outlook in the eurozone, and manufacturing is perhaps the most vulnerable sector to the escalating trade war, notably between the U.S and China. Manufacturing PMIs disappointed on Thursday, as German and eurozone releases were unexpectedly soft. German Manufacturing PMI dropped from 57.3 to 56.1, while Eurozone Manufacturing PMI fell from 55.1 to 54.6 points. Trade tensions continue to persist between the U.S and the EU as well, despite recent talks between senior officials. On Wednesday, President Trump threatened to slap a 25% tariff on all EU imports. If the threat of more U.S tariffs against the EU materializes, European car makers could be hit hard and in turn pull the DAX downwards.

There were no surprises from the Federal Reserve, which released the minutes of its meeting earlier in August. The minutes noted that the U.S economy remains strong and hinted that the Fed would raise rates in September. However, policymakers added that there plan to continue with gradual rate increases could have to be halted if the global trade war worsened, as the trade war represented a major downside risk to the U.S economy. Fed Chair Jerome Powell will address the Jackson Hole Symposium on Friday, and investors will be listening carefully. Powell is expected to refer to trade tensions, as well as the fact that inflation and wage growth have lagged, despite a booming U.S economy. The minutes have cemented a rate hike in September, with market odds currently at 96%. The likelihood of a December rate hike stands at 57%.

Economic Calendar

Thursday (August 23)

• 3:30 German Buba President Weidmann Speaks
• 3:30 German Flash Manufacturing PMI. Estimate 56.5. Actual 56.1
• 3:30 German Flash Services PMI. Estimate 54.3. Actual 55.2
• 4:00 Eurozone Flash Manufacturing PMI. Estimate 55.1. Actual 54.6
• 4:00 Eurozone Flash Services PMI. Estimate 54.4. Actual 54.4
• 7:30 ECB Monetary Policy Meeting Accounts
• 10:00 US New Home Sales. Estimate 643K
• Day 1 – Jackson Hole Symposium

Friday (August 24)

• 2:00 German Final GDP. Estimate 0.5%
• 10:00 Federal Reserve Chair Powell Speaks
• Day 2 – Jackson Hole Symposium

*All release times are DST

*Key events are in bold

DAX, Thursday, August 23 at 10:10 DST

Previous Close: 12,385 Open: 12,371 Low: 12,353 High: 12,410 Close: 12,393

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