DAX Drops as Eurozone Retail Sales Misses Estimate

The DAX index has posted moderate losses in the Tuesday session. The index is down 0.91%, and is currently at 12,730.00 points. On the release front, eurozone indicators pointed to a slowdown in the retail sector. Retail PMI dipped to 52.0, down from 52.7 points. As well, Retail Sales dropped to 0.1%, down from the previous reading of 0.3%. This was short of the estimate of 0.2%. There was better news from Eurozone Sentix Investor Confidence, which improved for a fourth straight month. The indicator climbed to 28.4 points, above the estimate of 27.6 points. On Wednesday, Germany releases Factory Orders, with the markets braced for a decline of 0.2 percent.

ECB policymakers meet on Thursday for a policy meeting, at which time the ECB will set the new benchmark rate. The central bank has maintained the rate at a flat 0.0% since March 2016, and no change is expected at the upcoming meeting. At the same time, euro-area growth was respectable in the first quarter, and the markets would like the ECB to acknowledge the improvement in its rate statement or at ECB President Mario Draghi’s press conference. The ECB has been cautious and is not expected to announce any changes to its asset-purchase program, which winds up in December. Will the ECB send out a hawkish message? Analysts will be poring over the rate statement and Draghi’s follow-up comments, and any nuances or hints about a tighter monetary policy could push the German stock exchange to higher levels.

The Federal Reserve is widely expected to press the rate trigger next week, which would mark the second quarter-point increase in 2017. Even a shockingly soft Nonfarm Payrolls report on Friday hasn’t put much of a dent in these expectations, with are rate hike currently priced in at 91 percent. Another rate hike by the Fed would mark a vote of confidence in the US economy, but Fed policymakers continue to have some concerns. Inflation remains stubbornly low, despite a labor market that remains close to capacity. Fed policy makers are also scratching their heads over soft consumer spending, which has not kept pace with high levels of consumer confidence. As for additional rate hikes in the second half of 2017, the markets remain skeptical, with the odds of a September rate hike at just 22%. However, stronger economic numbers in the third quarter could easily increase the likelihood a September hike.

Economic Calendar

Tuesday (June 6)

• 4:10 Eurozone Retail PMI. 52.0
• 4:30 Eurozone Sentix Investor Confidence. Estimate 27.6. Actual 28.4
• 5:00 Eurozone Retail Sales. Estimate 0.2%. Actual 0.1%

Wednesday (June 7)

• 2:00 German Factory Orders. Estimate -0.2%

*All release times are EDT

*Key events are in bold

DAX, Tuesday, June 6 at 7:05 EDT

Open: 12,775.50 High: 12,787.75 Low: 12,725.50 Close: 12,730.50

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