DAX – Quiet Start to Week, Markets Eye German ZEW Economic Sentiment

The DAX Index has posted slight gains on Monday, trading at 11,977.00 in the European session. In economic news, there are no major releases in the Eurozone. ECB President Mario Draghi will deliver remarks at an event in Frankfurt. On Tuesday, German releases will be on center stage. ZEW Economic Sentiment is expected to climb to 13.2, and Final CPI is forecast to rebound to 0.6%.

On Friday, the DAX dropped below the symbolic 12,000 level, as some ECB policymakers raised the possibility of higher interest rates at last week’s policy meeting. At the meeting, the ECB held course and maintained interest rates at a flat 0.00%. The markets were left to pick up on nuances, as ECB President Mario Draghi noted that the central bank removed one phrase from its standard introductory statement – “using all the instruments available within its mandate”. Draghi stated that the removal of this phrase means that the ECB “no longer has a sense of urgency in taking further actions …. prompted by the risk of deflation”. With growth and inflation showing signs of improvement, the ECB has been under pressure to tighten policy and reduce its asset-purchase program. Germany, in particular, is unhappy with the ECB’s ultra-loose policy and on Thursday, German Finance Minister Wolfgang Schaeuble bluntly stated that he wanted to see a “timely start to the exit” from the ECB’s asset-purchase scheme. For his part, Mario Draghi must balance the improved economy with upcoming elections in the Netherlands and France. Euro-skeptics are a strong force throughout Europe and Draghi is reluctant to make any major moves in the middle of heated political campaigns.

The US economy continues to steam ahead at full speed, buoyed by a red-hot labor market. On Friday, Nonfarm Payrolls sparkled with a gain of 235 thousand. This easily beat the estimate of 196 thousand. The strong release makes it a virtual certainty that the Fed will raise rates by a quarter-point on Wednesday. Although a rate hike has been priced in by the markets, there have been disappointments in the past, so a rate move will likely give the dollar a boost against its major rivals, such as the euro. The solid job numbers also give President Trump a much-needed boost. Trump is under pressure to present an economic agenda, but the markets won’t mind giving him some additional breathing room with the economy performing well.

Economic Calendar

Monday (March 13)

• 5:00 Italian Industrial Production. Estimate -0.6%
• 9:30 ECB President Mario Draghi Speech

Upcoming Key Events

Tuesday (March 14)

• 3:00 German Final CPI. Estimate 0.6%
• 6:00 German ZEW Economic Sentiment. Estimate 13.2
• 6:00 Eurozone Economic Sentiment. Estimate 19.3
• 6:00 Eurozone Industrial Production. Estimate 1.2%

*All release times are EST

*Key events are in bold

DAX for Monday, March 13, 2017

DAX, March 13 at 6:45 EST

Open: 11,956.25 High: 11,992.50 Low: 11,948.75 Close: 11,977.00

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