DAX gains ground as Moody’s maintains Italy’s credit rating

The DAX index has started the new trading week with considerable gains. In the Monday session, the index is at 11,607, up 0.47% on the day. The sole event on the schedule is the German Bundesbank monthly report. On Tuesday, Germany releases PPI and eurozone consumer confidence.

Relations between the U.S and China are strained, with global markets nervous that the trade war between the world’s two largest economies could worsen. The U.S Treasury Department released its semi-annual report on foreign exchange rates, and there was some relief in the markets as the report did not name China as a currency manipulator. Still, the report said that the U.S was “deeply disappointed’ with that China refuses to disclose the extent of its foreign currency intervention. The Chinese yuan has slipped some 9 percent since April, and U.S officials are concerned that China has deliberately weakened the currency in order to counter U.S tariffs on Chinese goods, and will continue to monitor China’s currency practices.

There was some good news out of Italy on Friday, as the Moody’s credit rating agency maintained the outlook on Italy’s credit rating as ‘stable’. There had been fears that Moody’s might downgrade Italy’s debt to ‘junk’, after it lowered its rating to Baa3, its lowest grade. The yield on Italian 10-year bonds dropped to 3.30%, its lowest level in two weeks. Italy’s draft budget has become the latest crisis for the European Union. The budget boosts public spending and cuts, and sets a budget deficit goal of 2.4%, which would be higher than last year, in breach of EU law. Italy’s debt stands at an astounding 132% of GDP, and there is a real risk that the country’s financial woes could destabilize the entire eurozone.

Desperately seeking stability

China equities lead the pack as US indices lag

European update – The calm before the storm

Economic Calendar

Monday (October 22)

• 6:00 German Buba Monthly Report

Tuesday (October 23)

• 2:00 German PPI. Estimate 0.3%
• 10:00 Eurozone Consumer Confidence. Estimate -3

*All release times are DST

*Key events are in bold

DAX, Monday, October 22 at 8:55 DST

Previous Close: 11,553 Open: 11,646 Low: 11,580 High: 11,676 Close: 11,607

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