DAX Edges Higher as ECB Meeting Looms

The DAX Index is slightly higher in the Wednesday session, trading at 11.951.50 in the European session. In economic news, German Industrial Production rebounded with a strong gain of 2.8%. On Thursday, the ECB holds its monthly policy meeting and is expected to maintain interest rate levels at 0.00%.

After some solid data last week, German numbers are mixed this week. Industrial Production gained 2.8%, its strongest gain since January 2016. Factory Orders plunged 7.4% in February, much worse than expected. Retail sales, the primary gauge of consumer spending, declined 0.8%, compared to an estimate of 0.2%. This marked a fifth decline of six releases, as the German consumer continues to hold tight to her purse strings. If data from Germany, the Eurozone’s largest economy, continues to point downwards, investors could get edgy and drag the DAX to lower levels.

The DAX flirted with the symbolic 12,000 level last week, but has dipped lower following a capital raise announcement by Germany’s Deutsche Bank. The bank has announced a major reorganization, including raising EUR 8 billion by issuing 687.5 million shares on March 21. Deutsche Bank has hit rough waters, and it seemed only a matter of time before it would have to take some drastic measures. In December, the bank reached a $7.2 billion settlement with the U.S. Department of Justice for selling toxic mortgage-backed securities. Deutsche had a dismal 2016, with losses of EUR 1.4 billion. This capital hike is the fourth since 2010, and it remains to be seen if this move will attract investors and help set the bank in the right direction. Deutsche Bank is one of the larger companies on the DAX, so lower share prices this week for Deutsche has weighed on the DAX.

The markets have been focused on a likely March move by the Federal Reserve, paying less attention to the ECB policy meeting on Thursday. The benchmark rate has been pegged at 0.00% since March 2016, and no change is expected at the upcoming meeting. Inflation levels have moved higher and Eurozone inflation is expected at 2.0% in February, meeting the central bank’s inflation target. ECB President Mario Draghi appears comfortable with current monetary policy, although the ECB could tighten its stance if growth and inflation levels continue to point upwards.

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Economic Calendar

Wednesday (March 8)

• 2:00 German Industrial Production. Actual 2.8%
• 2:45 French Trade Balance. Estimate -3.7B. Actual -7.9B

Thursday (March 9)

• 7:45 ECB Minimum Bid Rate. Estimate 0.00%
• 8:30 ECB Press Conference

*All release times are EST

*Key events are in bold

DAX for Wednesday, March 8, 2017

DAX, March 8 at 6:55 EST

Open: 11,922.45 High: 12,018.50 Low: 11,920.00 Close: 11,941.50

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